
Russian roulette as oiligarchs battle over TNK

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ROBERT DUDLEY had a suitcase packed on Friday, ready to leave Russia. The chief executive of TNK-BP thought he was going to be kicked out by the authorities, but they relented, letting him stay for another 10 days while they determine whether he has the right to work there.
The mind games over Dudleys visa are the latest scuffle between BP and its Russian partners over control of TNK. The stakes are high. Russia is the second-largest producer of oil after Saudi Arabia, and TNK is its third-biggest asset. It is a critical source of growth and profits for BP, which like most western oil companies is struggling for both.
BP struck the TNK joint-venture deal in 2003 in what was hailed as a trend-setting piece of Anglo-Russian co-operation. Relations have soured in the past year, however, with the local partners accusing BP of mismanaging the company and running it for BPs benefit. Mikhail Fridman, the billionaire who is one of the TNK investors, makes the arguments in a rare interview (see links below).
BP says the criticisms are nonsense. Whatever validity they do have, it is clear they obscure a much bigger game that is afoot, one to do with economic nationalism rather than shareholder returns. The Kremlin has in recent years steadily asserted its control over what it considers key national assets in the sector. After the destruction of Yukos and marginalisation of Royal Dutch Shell at the Sakhalin gas field, TNK is next on the list.
BP is a big, tough company, and knew when it first went to Russia what it was getting involved in. The TNK relationship, in fact, grew out of a scrap between BP and Fridman when it accused him of stripping assets out of another oil company, Sidanco, in which BP held a stake. In the pursuit of riches, it has chosen to lie with some odd bedfellows.
In a battle with the state, though, it is defenceless. The Kremlin will in the end take TNK if it wants it. Riding roughshod over BPs rights, however, will harm Russias interests. It still needs western expertise and money to develop its economy and ostracising groups like BP will make others less willing to help.
http://business.timesonline.co.uk/tol/business/columnists/article4363046.ece
Posted in: BP, Russia, The Times.
Tagged: BP · Kremlin · Oil · Russia · Sakhalin · TNK-BP
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