Shell apologizes for buying Russian oil, says it will halt operations in Russia

Global energy giant Shell has apologized for its past purchases of Russian petroleum products and agreed to phase out all involvement with the country’s oil and gas industry, which accounts for about a 10th of global oil supply.

The stunning move from one of the world’s largest oil companies deepens a global private-sector embargo that has isolated Russia’s economy over the past week. Russia’s petroleum exports have already diminished since it launched an unprovoked attack on neighboring Ukraine just under two weeks ago, with international shipping firms shying away from Russian purchases. Shell has already suspended its operations there, along with BP and ExxonMobil.

Shell’s announcement Tuesday could cut Russia off from a major international customer.

“As an immediate first step, the company will stop all spot purchases of Russian crude oil,” the London-based company said in a statement. “It will also shut its service stations, aviation fuels and lubricants operations in Russia.”

Ben van Beurden, Shell’s CEO, apologized for buying Russian crude oil last week and said that any profits would be donated to provide humanitarian support during the Ukraine crisis.

“We are acutely aware that our decision last week to purchase a cargo of Russian crude oil to be refined into products like petrol and diesel . . . was not the right one and we are sorry,” van Beurden said in a statement. He pledged to “commit profits from the limited, remaining amounts of Russian oil we will process to a dedicated fund” and promised to aid humanitarian agencies over the coming weeks.

Van Beurden said there were “incredibly difficult trade-offs that must be made during the war in Ukraine.”

The private-sector embargo is already rippling through global oil markets.

» READ MORE: Biden to ban Russian oil imports over Ukraine war, source says

This week, the national average gasoline price in the United States climbed to $4.17 per gallon, according to the AAA Gas Prices website, the highest ever recorded since the company began tracking gas prices in 2000. The upward march in global oil prices is set to continue and inflate what drivers in the United States and elsewhere pay at the pump.

European governments have so far held off on banning Russian petroleum products. And some of Shell’s European peers have been more cautious in moving away from Russia.

BP was less emphatic than Shell in its intention to phase out Russian energy supplies. A spokesman said the company “will continue to meet existing contractual obligations subject to meeting sanctions, security, and shipping requirements and where it is safe to do so.”

The company also said it would not charter vessels owned, operated or flagged by Russia “where possible.” BP could, however, enter into new business with Russia if it were “essential for ensuring security of supply.”

French energy giant TotalEnergies also walked a finer line, saying it would halt new spending in Russia but maintain its partnership there, including a nearly 20 percent stake in Russian gas producer Novatek.

» READ MORE: What does a U.S. ban on Russian oil accomplish?

TotalEnergies chief executive Patrick Pouyanné said at an energy industry conference Monday that his company would not renounce its Russian connections, noting that European governments had not directed it to do so.

“I had discussions obviously with the highest authority in my country, and there is no push from them for us to exit Russia,” he said, according to Reuters.

U.S. officials are looking for ways to take the pressure off global energy markets and ease the pocket pain of consumers, but analysts warn there is no supplier that could easily supplant Russia, the world’s third-largest energy producer. Oil prices hit their highest point in over a decade on Monday as it appeared increasingly likely that Western sanctions would not spare the Russian energy industry.

This week, Russia threatened to cut the flow of gas to Europe through a major pipeline, which could leave countries facing oil prices of more than $300 per barrel, according to a Russian official.

“It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market,” Russian Deputy Prime Minister Alexander Novak said in a statement Monday on state television. “The surge in prices would be unpredictable. It would be $300 per barrel, if not more,” he said.

The Biden administration has pushed its allies to support a ban on Russian oil imports. European Union leaders will meet in Versailles, France, on Thursday to discuss the possibility of phasing out the bloc’s dependency on Russian energy.

Western nations have been engaged in negotiations with Tehran for a possible nuclear deal that could return Iranian crude to international markets. And U.S. diplomats traveled to Venezuela over the weekend to discuss that nation’s oil exports, The Washington Post reported.