BP has pledged to put $20 billion into an escrow account for claims stemming from the Deepwater Horizon oil spill, and to suspend any dividend payments to shareholders this year.
American politicians have been making loud noises about a dividend payment being unacceptable, and US President Barack Obama appears to have got his way after a meeting with the oil company’s chairman Carl-Henric Svanberg (pictured).
“This $20 billion will provide substantial assurance that the claims people and businesses have will be honoured. It’s also important to emphasize this is not a cap,” said Obama after the meeting.
“The people of the Gulf have my commitment that BP will meet its obligations to them.”
The New York Times profiles the man who will be in charge of the $20bn fund. Kenneth R. Feinberg has previously been involved in the September 11th Victim Compensation Fund, legal actions from US troops regarding Agent Orange, and the setting of a market value for the famous film of the assassination of JFK.
The move could cost BP shareholders, many of them, famously, UK pension funds, roughly $7.5 billion during the next three quarters. BP has said it will consider resuming payments in 2011, but could face pressure to cancel them even then, and wait instead until the Gulf recovers from this massive spill, the effects of which are likely to dominate world headlines long after the oil leak itself has finally been staunched. So, clearly, income investors are out in the cold; one of their safest bets has come spectacularly unstuck.
Meanwhile, in the Gulf, the oil is still leaking.
Image: Official White House Photo by Pete Souza