Why the SLB should stop supporting Putin’s war machine

Russia’s full-scale invasion of Ukraine in February 2022 had devastating human consequences: tens of thousands of Ukrainian civilians and hundreds of thousands of Russian and Ukrainian military casualties. More than eight million Ukrainians were displaced within the country and another eight million fled the country, creating Europe’s largest refugee crisis since World War II.

Russia’s vast oil reserves were crucial to Putin’s ability to finance this immoral war. SLB, a Houston-based oilfield services company formerly known as Schlumberger, has played a crucial role in boosting Russian oil production. The company is now doubling down on its efforts and expanding its presence in Russia, putting profit above principle.

SLB is the world’s largest offshore drilling company, with revenues of over $33 billion in 2023. The company employs more than 110,000 people worldwide. As British advocacy group Global Witness recently reported, SLB has signed new contracts in Russia and hired hundreds of employees, expanding its operations after its two biggest US competitors, Halliburton and Baker Hughes, sold their Russian businesses to their local managers. Since the invasion of Ukraine, SLB companies in Russia have patented 43 inventions and registered six proprietary computer programs.

In December 2023, Russian subsidiary Schlumberger signed a modest deal with a Russian oil and gas research institute called VNIGNI, a state-funded institute created to conduct geological research to support Russian fossil fuel exploration. VNIGNI conducts its banking with Rosbank, one of the largest Russian banks, which itself was sanctioned by the US in 2022 and the EU in 2023. Yet according to Global Witness, neither the EU nor the US has sanctioned VNIGNI, and “it does not appear to be a violation of EU sanctions for a Russian subsidiary of an EU company like SLB to do business with Rosbank.”

SLB is also stepping up its recruitment efforts in Russia. Global Witness reports that “in the first quarter of 2024, the company held 19 job fairs and presentations, almost all at universities – twice as many as in the same period in 2023. “Moscow never sleeps, and Schlumberger never misses an opportunity to meet with students!” the company wrote on Russian social media site VKontakte.

The US and EU have effectively prioritized maintaining stable energy markets and prices over efforts to undermine Putin’s war machine. As the US Treasury Department’s Office of Foreign Assets Control (OFAC) acknowledged in 2022, “The energy sector of the Russian economy itself is not subject to comprehensive sanctions. However, certain energy-related transactions may be subject to bans or restrictions under various sanctions powers.” As Global Witness correctly notes, “since the invasion, the West has decided to prioritize maintaining Russia’s oil supplies over decisive action that would have further damaged its oil exports and revenues.”

In late 2023, an investment bank analyst interviewed SLB CEO Olivier Le Peuch and asked him to elaborate on SLB’s plans for its Russia business. Le Peuch responded very cautiously, saying only: “We expect (the Russia business) to decline in percentage terms, but not to 0 in 2024.” Le Peuch was quick to stress that his company “will continue to ensure that our remaining presence complies with and exceeds all international sanctions.”

Le Peuch is betting that the world needs Russian oil and that Western governments are willing to look the other way while the SLB helps Putin keep the oil flowing. The Kiev School of Economics estimates that Moscow will earn $178 billion from oil sales this year, and next year it could be as high as $200 billion. That’s just a little less than the $218 billion Russia earned in oil revenues in the first year of the war, when Western European states still bought about half of its oil exports. Russia’s benchmark Urals crude traded at $84 a barrel in October, still remarkably close to the $90 average price of Brent oil over the same period.

While Western sanctions are aimed at preventing the import of Russian oil into Western countries, recent figures from the Institute of International Finance (IIF) show that China, India and Turkey have sharply increased their imports of Russian oil since the beginning of the Ukraine war, and some of it inevitably finds its way to Western markets.

If the US and EU are serious about crippling the Russian war machine, they must expand their sanctions and explicitly prohibit oilfield service providers like SLB from contributing to Russian oil production. This measure would have a very practical impact: it would reduce the oil revenues that are essential to Putin’s war.