Russia turns up the heat on BP

published 4 July 2008

The "acrimonious struggle" between BP and its Russian partners has escalated, said Ed Crooks in the FT. BP and four Russian oligarchs share ownership of the $30bn Russian TNK-BP joint venture. Having barred around 150 of TNK-BP's foreign executives by court order, Moscow relented but then only agreed to issue half the number of Russian work permits requested by BP, and too late to allow many staff, including BP's local chief executive, Bob Dudley, to secure new visas.

The economic stakes are high

Without a senior management team from BP in place the joint venture is ripe for "pilfering by the oligarchs", as Jeremy Warner said in The Independent. This could entail a power-sharing deal with a Russian oil giant such as Rosneft. If the intention is indeed to "push BP out of Russia", said The Guardian's Nils Pratley, then the firm faces the "deeply unpalatable" prospect of losing "20% of its production and 10% of its current value".

Can BP make a deal?

A compromise depends on the extent to which the oligarchs "have the backing of the Russian government in making life so uncomfortable for BP", said Warner. The danger is that with the oil price now so high, Moscow may now be confident that Russia no longer depends on the advanced technology offered by Western firms and can "buy whatever it needs anywhere", said Pierre Briancon on Breakingviews.com If so, BP "may stand little chance of coming out ahead".