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BP accused of arrogance and incompetence by oligarch partner in joint Russian venture logo

BP accused of arrogance and incompetence by oligarch partner in joint Russian venture

· Chief’s statements ‘are like Goebbels propaganda’ 
· Inflammatory comments suggest no reconciliation

  • Tuesday June 17 2008

BP’s reputation in Russia came under attack yesterday when the billionaire oligarch at the centre of a row over the company’s troubled Russian joint venture accused BP of “arrogance” and Nazi-style behaviour.

Mikhail Fridman said the oil venture TNK-BP had performed “dismally” since BP took a 50% stake in the company in 2003. Fridman owns half of the venture with three other oligarchs.

He also implicitly compared BP’s chairman, Peter Sutherland, to Joseph Goebbels, the Nazi propaganda chief. Sutherland suggested last week that Fridman and the other Russian shareholders were trying to grab control of TNK-BP in a 1990s style corporate raid.

Asked whether he planned to usurp BP, Fridman told the business daily Vedomosti: “That’s in the best tradition of Goebbels propaganda.” He insisted he was not a “typical cash-grabbing oligarch”.

During a press conference in Moscow yesterday, Fridman continued his assault on BP’s reputation, suggesting the joint venture in Russia had underperformed because of BP’s managerial incompetence. Fridman again demanded that Robert Dudley, TNK-BP’s embattled chief executive, resign. “Any other board would have dismissed its CEO long ago,” he said, adding that Dudley had ignored his demands for “parity” on TNK-BP’s board and had broken Russian law.

He also suggested that the company’s two halves disagreed profoundly about future strategy. The Russian oligarchs wanted TNK-BP to expand internationally, including countries such as Iraq, Syria and Cuba, he said. BP, by contrast, did not want the company to operate anywhere overseas where it might compete with BP’s existing interests, he added.

“There is a word in English for how BP has behaved – it’s arrogance,” Fridman declared. Asked whether the Russian shareholders had made a mistake when they went into business with BP, he told the Guardian: “I don’t think so. But we may have been naive about how it might work.” Fridman’s latest inflammatory comments suggest that the relationship between BP and its Russian partners, who hold their stake via the Alfa-Access-Renova consortium, has broken down irrevocably.

Yesterday’s Kommersant newspaper said BP was negotiating a possible asset swap with the Russian shareholders, which would see them relinquish their 50% TNK-BP stake to BP in exchange for 7.6% of shares in BP itself. But Fridman said this was not the case, declaring: “This is an option for the distant future.”

BP now faces the very real prospect that it might indeed lose control of the oil venture to a group of ruthless businessmen with close ties to the Kremlin. TNK-BP is a crucial part of BP’s operation and accounts for 25% of its global oil production.

The oligarchs, who also include Viktor Vekselberg, Len Blavatnik and German Khan, have taken legal action against BP. Last week the shareholders sued BP in Russia and the Stockholm international arbitration court, accusing it of holding an illegal meeting without them.

While the Stockholm action is likely to drag on, it is possible that the oligarchs will succeed in their attempts in Russia to have BP directors fired from TNK-BP Holding. So far, BP appears to have been outwitted by its Russian partners. Fridman said yesterday that BP had expected the Russian businessmen to just take a dividend from the firm without playing an active role. He was also scathing about TNK-BP’s lacklustre British-managed performance. He said TNK-BP and the Russian oil firm Lukoil were both worth about $16bn (£10bn then) five years ago. But while Lukoil now had a capitalisation of $96bn, TNK-BP had grown to a mere $40bn.

The company was also unhealthily reliant on expensive foreign experts, he said, adding that it was possible these days to recruit qualified experts within Russia. Some 148 BP secondees to TNK-BP have been locked out of their office since March when the dispute first became public.

Last night BP described Fridman’s Goebbels remarks as “not worthy of comment”. It rejected claims that TNK-BP had underperformed and said Fridman’s figures were unreliable. The venture had the fastest growth in oil reserves of any major Russian oil company, BP said.

Tony Blair, who presided over the merger between TNK and BP in 2003 with Vladimir Putin, is giving a speech in Moscow today and may meet Dudley. Britain’s ties with Russia have worsened since the murder in 2006 of the former KGB agent Alexander Litvinenko.

Yesterday, however, Fridman insisted the row between London and Moscow had nothing to do with TNK-BP’s woes. “This is the kind of shareholders’ dispute you get in any country,” he insisted.

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