Sanctioned oligarchs take stake in largest UK oil firm

In a recent development, two Russian oligarchs under international sanctions have secured a significant stake in the United Kingdom’s largest oil producer following a strategic acquisition. The investment firm LetterOne, which is partially owned by Mikhail Fridman and Petr Aven, now holds nearly 15% of Harbour Energy after the latter completed a deal to purchase a major German oil and gas firm.

Despite the involvement of Fridman and Aven, who were sanctioned in March 2022 in response to Russia’s invasion of Ukraine, LetterOne itself is not subject to sanctions. Furthermore, the oligarchs have no direct involvement with Harbour Energy’s operations nor do they benefit from its profits. The transaction involved Harbour Energy acquiring most of Wintershall DEA’s oil and gas assets from BASF, a German chemical conglomerate. LetterOne, a previous shareholder in Wintershall, has exchanged its Wintershall shares for an ownership stake in Harbour Energy.

Notably, the agreement excludes some of Wintershall’s Russian assets, including a joint venture with Gazprom, which remain under BASF’s control. Under the terms of the deal, LetterOne will not have voting rights within Harbour Energy but will receive dividends from the company’s profits. There is a provision that allows LetterOne’s shares to be converted into voting shares if Fridman and Aven’s sanctions are lifted.

LetterOne’s global asset portfolio is valued at approximately $18 billion (£13.8 billion) and includes diverse investments such as the health food retailer Holland and Barrett. Fridman and Aven jointly own just under half of LetterOne, with another Russian investor, Andrei Kosogov, holding the remainder. Kosogov himself is not subject to sanctions.

In 2022, the UK government intervened to force the sale of LetterOne’s regional broadband provider, Upp, due to concerns over national security. LetterOne has contested this decision and is appealing the government’s action.

Louis Wilson, who leads fossil fuel investigations at the campaign organization Global Witness, has criticized the deal, stating, “The UK government and Harbour should have distanced themselves from this arrangement. It is alarming that a company part-owned by sanctioned Russian oligarchs, deemed a security threat in the context of a few thousand UK broadband connections, has now acquired a substantial interest in the country’s largest oil producer. Oligarchs should not be involved in the UK’s energy sector.”

In response, a spokesperson for LetterOne emphasized the company’s commitment to making significant long-term investments in important industries. “LetterOne is proud to be part of a larger and more robust UK energy enterprise,” the spokesperson stated. “Our involvement will contribute to enhancing energy security, driving investment, and creating job opportunities, all while supporting the UK’s ambitious energy transition goals.”