Case Studies

Shell buys discounted “blood” oil from Russia: good business, bad PR

Money doesn’t change who you are; it reveals who you are.”

Shell's Russian Oil

Shell has just purchased 100,000 metric tons of flagship crude from Russia at a record discount. With many firms including BP shunning Russian oil due to Moscow’s unprovoked invasion of Ukraine, Shell’s deal with Russia has drawn sharp criticisms from around the world. It is also seen as a disastrous public relations move.

A combination of uncertainty of the scope of existing sanctions, logistical issues, problems obtaining letters of credit and companies shunning Russian oil led to Russia’s heavy discount of its key export crude Urals.

It is reported that Shell paid $28.50 a barrel for the purchase. The price of crude oil has already jumped to an all-time high of nearly $125 per barrel. It is being speculated that the price could hit $150 if the Russia – Ukraine war continues.

“Russian oil, Ukrainian blood”

Shell's Russian Oil

Ukraine’s Foreign Minister Dmytro Kuleba, fired the first shot at Shell. “The world will judge them accordingly. Companies like Shell doing business with Russia are on the wrong side of history, and history will judge them accordingly. One question to Shell: doesn’t Russian oil smell Ukrainian blood for you?”

Shell’s response

Shell's Russian Oil

Shell in a statement said, “the purchase was made with the intent of providing security of energy supply. We didn’t take this decision lightly and we understand the strength of feeling around it. We will continue to choose alternatives to Russian oil wherever possible.”

After receiving intense backlash for buying the Russian oil shipment, the oil company said it would “commit profits from the purchase to a dedicated fund” and would coordinate with humanitarian agencies and partners for how to distribute the money.

Shell added that it had been in “intense talks with governments and continue to follow their guidance around this issue of security of supply, and are acutely aware we have to navigate this dilemma with the utmost care.”

Why is this a bad PR step by Shell?

Shell's Russian Oil

The Russian deal is smart business but bad PR for the following 3 reasons:

1. Swimming against public opinion

Best PR practice always aims to keep the balance of the weight of public opinion tilted in your favour. You do so by riding on the waves of public opinion, not against it.

With most of the world demonstrably united in its condemnation of Russia, Shell’s Russian oil deal is a PR swim against the flow of public opinion and sentiments.

 2. Charity cover

Shell’s pledge to use the profits as a charity fund for Ukraine raises more questions than answers. The biggest question is, why wait to make a profit from the oil transaction before pledging to help Ukraine?  Analysts see this as a face-saving afterthought and not an authentic act of philanthropy.

3.Words and action mismatch

Shell’s actions and words are moving in opposite directions. Shell had earlier announced that it was cutting ties with the Russian state-owned energy giant Gazprom. This was a result of Russia’s thirst for blood, power, and war with Ukraine. Shell’s chief executive, Ben van Beurden, said very nice words:” We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security.”

Perhaps that shock quickly wore off. A few days after, the company made a large-scale purchase from same Russia that it had eloquently condemned a few days earlier.

When your action matches your words, that is good PR.

References:

CNBC

Cleantech

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2 Comments

  1. Great insights. This article is timely. Kudos to the PRnomics team.

  2. Great insights. This article is timely. Well done, PRnomics team.

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