Exxon quits some Russian joint ventures, citing sanctions

In 2012, Exxon and Rosneft detailed an exploration partnership with plans to invest as much as $500 billion in developing Russia’s Arctic and Black Sea oil reserves. (Reuters)
Updated 01 March 2018

Exxon quits some Russian joint ventures, citing sanctions

HOUSTON/MOSCOW: Exxon Mobil Corp. will exit some joint ventures with Russia’s Rosneft, citing Western sanctions first imposed in 2014, while the Russian company said the pullout will result in serious losses for its US partner.
The move is an about-face for Exxon, which had opposed the sanctions over Russia’s invasion of Crimea and argued they unfairly penalized US companies while allowing foreign energy rivals to operate in the country, the world’s largest oil producer.
Yet the sanctions were effective in slowing work on a project by Exxon and Rosneft on what was hailed as a major discovery in the Kara Sea above the Arctic Circle.
Rosneft, Russia’s largest oil company, said last year that it planned to return to operations at the project in 2019.
Exxon’s exit from projects will not affect the Sakhalin project off the eastern coast of Russia, Exxon and Rosneft spokesmen said.
Sakhalin-1 operates under a Production Sharing Agreement struck in the mid-1990s and currently produces around 200,000 barrels of oil per day.
Representatives for the US Department of State and Treasury Department did not have immediate comment. The joint ventures were reached when US Secretary of State Rex Tillerson was Exxon’s chief executive.
A Rosneft’s spokesman said ExxonMobil would incur serious losses because of the decision.
Rosneft spokesman Mikhail Leontyev said Exxon had been forced to take what he called a predictable decision, but confirmed the move would not affect the Sakhalin-1 joint venture.
“It (Exxon) will suffer serious losses as a result of this (decision),” said Leontyev.
Exxon said it will formally start the process of withdrawing from the joint ventures this year.
In 2012, Exxon and Rosneft detailed an exploration partnership with plans to invest as much as $500 billion in developing Russia’s Arctic and Black Sea oil reserves. Further deals were signed in 2014.
Exxon said in a financial filing on Wednesday that it recorded a fourth quarter after-tax loss of $200 million due to the withdrawal plan.
The US and the EU imposed economic sanctions on Russia over its annexation of Crimea in 2014 and its role in eastern Ukraine conflicts.
The US government also imposed sanctions on Rosneft Chief Executive Igor Sechin that year.
The sanctions prohibit US citizens or people in the United States from dealing with those on the blacklist, such as Sechin. Rosneft itself is subject to narrower US sanctions that still allow Americans to deal with the company on some transactions.
The US government fined Exxon $2 million for signing the joint ventures just after sanctions were imposed in 2014, saying the company showed a “reckless disregard” for the sanctions. Exxon called the fine “capricious” and appealed it.
Still, Exxon wound down drilling in Russia’s Arctic in 2014 after the sanctions were imposed. Exxon was allowed to finish some drilling projects as the sanctions took effect.


Hermes echoes global luxury sales rebound

Updated 17 min 18 sec ago

Hermes echoes global luxury sales rebound

  • Handbag icon reaps benefits of online surge in Asia as pandemic curbs ease

PARIS: Hermes’ comparable sales picked up in the third quarter, rising 7 percent, and the Birkin bag maker said this positive momentum had extended into October after a rebound in Asia and other regions as coronavirus restrictions eased.

Luxury goods manufacturers were hit hard by store closures during lockdowns to combat the pandemic and sales for the industry as a whole are expected to fall by up to 35 percent this year — an unprecedented plunge after a decade of stellar growth.

But a gradual re-opening, even as governments bring in fresh measures to fight rising COVID-19 infections, has helped sales to recover. High-end labels, which used to be more reticent to sell their pricey products online, have also seen web revenues surge.

Hermes — known for its $12,000-plus handbags like the Birkin, which often generates waiting lists — already sells a selection of leather goods online, but said it would make a larger push.

“We are going to gradually increase our offer of products online, except for the very iconic products such as Birkin,” finance chief Eric du Halgouet told reporters.

He said the online channel had now become the group’s “biggest store,” with revenues exceeding those of any of its flagship shops. Sales online grew by nearly 100 percent in all regions in the first nine months of the year.

Hermes’ comparable sales, which strip out the impact of foreign exchange rates and acquisitions, came in at €1.8 billion ($2.13 billion) in the three months to end-September — making it the first luxury brand to post rising overall revenues in the third quarter. Sales of leather goods grew 8 percent in the period while fashion sales were also up, echoing buoyant trends at Louis Vuitton owner LVMH.

“We think this performance reflects the strength of the brand, continued polarization between winners and losers and better insulation from a lower than industry average exposure to tourist demand,” said Citi analyst Thomas Chauvet.

Growth in the third quarter was strong in Asia, where lockdown restrictions were eased first, with sales up 25 percent, while revenues fell by 15 percent in Europe — including a 23 percent drop in France — and by 5 percent in the Americas.

Despite the overall rebound, revenue from Hermes silk scarves were down 20.5 percent in the period. The group said that was due to an unfavorable comparison to a year ago and lower travel retail activity.

Du Halgouet said the positive sales trend of the third quarter had continued into October and the group had not yet seen an impact from new restrictions imposed by European governments as contagion numbers rise again sharply.

But Hermes struck a cautious note for the full-year outlook, saying the impact of the COVID-19 epidemic remains “difficult to assess, as the scale, duration and geographic extent of the crisis evolve every day.”

At constant currencies, sales in the first nine months fell 14 percent to €4.29 billion.