Energy giant British Petroleum (BP) has opened a new front in the West's isolation campaign against the Russian economy, with its decision abruptly and costly to end three decades of operating in the energy-rich country, marking the most aggressive move yet by a Western company in response to Moscow's invasion of Ukraine.

Western allies have ramped up efforts to punish Russia with new sanctions including shuttering their airspace to Russian aircraft, cutting some of its banks off the SWIFT financial network and limiting Moscow's ability to deploy its $630 billion foreign reserves – measures that are expected to pulverize the country's financial markets and economy.

BP, the biggest foreign investor in Russia, said it was abandoning its stake in the state oil company Rosneft at a cost of up to $25 billion, shrinking its oil and gas reserves in half.

"I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected. It has caused us to fundamentally rethink BP's position with Rosneft," BP Chief Executive Bernard Looney said.

The British company's abrupt move puts the spotlight on other Western corporations with operations in Russia, including France's TotalEnergies and Britain's Shell, amid growing pressure from governments to tighten the financial screws on Moscow after it launched the biggest assault on a European country since World War Two.

The rapid retreat of BP also underscores growing pressure from Western governments on their companies to curtail operations in Russia as they widen a net of economic sanctions against Moscow.

In a video call on Sunday, the European Union's internal market chief told the chief executives of Alphabet and its YouTube unit to ban users pushing war propaganda as part of measures to halt disinformation on Ukraine.

Alphabet's Google has already barred Russia's state-owned media outlet RT and other channels from receiving money for ads on their websites, apps and YouTube videos, similar to a move by Facebook after the invasion.

A no-go zone

In an unprecedented step, European nations and Canada moved to shut their airspace to Russian aircraft and the United States is mulling similar action, according to the United States officials.

United States-based United Parcel Service Inc and FedEx Corp, two of the world's largest logistics companies, have said they are halting delivery service to Russia and Ukraine.

Large parts of the Russian economy will be a no-go zone for Western banks and financial firms after the SWIFT decision.

Even neutral Switzerland will likely follow the EU in sanctioning Russia and freezing Russian assets, its president said on Sunday.

Russians queued at ATMs over the weekend worried that the new sanctions will trigger cash shortages and disrupt payments.

Tech companies have also been affected with chipmaker Dell Technologies Inc suspending sales in Ukraine and Russia after U.S. restrictions on exports of computers, sensors and other hi-tech equipment were announced.

'Unprecedented political pressure'

Rosneft blamed BP's decision to abandon its 19.75% stake in the Russian oil giant on "unprecedented political pressure," Russian news agencies reported, saying 30 years of successful cooperation had been ruined.

Susannah Streeter, a senior investment analyst at British retail stockbroker Hargreaves Lansdown, said it will be "highly difficult" for BP "to recover anywhere near what was considered to be the full value" of Rosneft.

Last week, Looney said that BP was sticking to its Russian business and would comply with any Western sanctions on Moscow.

Earlier, Putin put Russia's nuclear deterrent on high alert in the face of Western reprisals for his invasion of Ukraine, which included blocking access to the SWIFT international payment system for some Russian banks.

And Norway's $1.3 trillion sovereign wealth fund, the world's largest, will divest its Russian assets after the Ukraine invasion, its prime minister said.

Dividend Blow

BP said its move and financial hit will not impact its short and long-term financial targets within its strategy to shift away from oil and gas to low-carbon fuels and renewable energy.

But Hargreaves Lansdown's Streeter said a write-down of this magnitude is "likely to limit the extent to which BP can continue to accelerate its transition towards renewables."

Looney and his predecessor as CEO Bob Dudley will both step down from the board of Rosneft, which BP acquired a shareholding in as part of its $12.5 billion TNK-BP stake sale in 2013.

BP held a board meeting on Friday and another on Sunday where the decision to quit Rosneft, as well as two other joint ventures BP has with Rosneft in Russia, was taken, a spokesperson for the company said.

It will take an $11 billion foreign exchange non-cash charge after the exit from Rosneft, which BP will no longer include in its accounts. BP said it also expects a second non-cash charge of up to $14 billion, for the "carrying value" of Rosneft.

BP received revenue from Rosneft in the form of dividends which totaled around $640 million in 2021, roughly 3% of its overall cash flow from operations.

The company currently has around 200 employees in Russia, most of whom are local staff, the BP spokesperson said.

Many other Western energy companies have operations in Russia, including TotalEnergies which holds a 19.4% Novatek stake and 20% of the Yamal LNG project.

"In the current environment any European or American company with assets in Russia must be considering similar moves," Eurasia Group analyst Henning Gloystein told Reuters.