Disclosure Drops in Russia's Oil Sector

Western sanctions against Moscow over the war in Ukraine have made publicly traded Russian companies less transparent. Corporations have reduced the amount of information they are sharing with investors and the wider public, including regular financial reports. Moscow's decision to stop circulation of Russian depositary receipts outside the country has also prompted many oil and gas companies to delist from international stock exchanges, including London. The lack of transparency could make it harder to track the performance of Russia's oil and gas sector as the EU and US try to cut off revenues to Moscow through embargoes and other restrictions on its energy flows. Moscow has also allowed Russian companies to delay annual shareholders meetings (AGMs), provided leeway on election of new directors, and permitted them to hold shares repurchased on the open market for up to two years rather than cancel them. Russian energy companies' AGMs will be held behind closed doors this year using absentee votes — the same practice used during Covid-19 lockdowns. Gazprom, its oil subsidiary Gazprom Neft, and Lukoil said they would terminate their American Depositary Receipt (ADR) programs, while independent gas producer Novatek and regional oil producer Tatneft have received exemptions. Russia's state-controlled Rosneft has been tight-lipped on its Global Depository Receipts (GDRs), but US-based investment bank JPMorgan has warned the owners of Rosneft GDRs that it has stepped down as the Russian company's depositary starting from May 13. Lukoil said its ADR holders could convert them to the Russian major's ordinary shares until Dec. 30, 2022. ADR holders accounted for 30.6% of Lukoil's charter capital at the end of May 2021. Rosneft's GDRs amounted to only 4.8% of the company's shares.