Moscow turns up the heat on BP

More Russian headaches for BP, as the Kremlin looks set to force nearly 150 of its top brass out of the country...

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Last Updated: 31 Aug 2010

BP boss Tony Hayward has suffered another big setback in the battle for control of TNK-BP, its joint venture with four Russian billionaires. Just in case we were in any doubt whose side the Kremlin was on, it’s just turned down work permit applications for nearly 150 of BP’s non-Russian technical specialists – including CEO Robert Dudley. Since all their visas run out at the end of July, they now have just one month to find a compromise, or every single one of them will be kicked out of the country. And to be honest, it doesn’t look like the Kremlin’s in a very compromising mood…

It’s the latest twist in BP’s ongoing spat with its deep-pocketed Russian shareholders. On the surface, the issue is operational control – the Russian billionaires are claiming that Dudley is running the group like a foreign subsidiary of BP, and want him out. However, BP reckons this is rubbish; it seems to share the general suspicion that this is just a thinly-veiled attempt by Moscow to grab control of the one big Russian energy company that’s not in Russian hands. After Shell was forced to sell Sakhalin-2 to Gazprom last year, it’s no surprise that some are wondering whether the Kremlin has similar plans for TNK (for the sake of our kneecaps, we're staying neutral on this point).

Certainly the fight seems to be getting dirtier. Since this row erupted, BP has suddenly found itself under investigation for tax fraud, immigration and employment law breaches and even industrial espionage by the local Russian authorities, who’ve accused employees of leaking information about Gazprom to foreign companies. This latest work permit hearing was held at the same time as TNK’s AGM, meaning that there was no way Dudley could be present to plead his own case.

Of course BP is protesting bitterly about this latest indignity, and warning of the dire consequences – ‘The loss of these staff will definitely damage TNK-BP, its performance and, by extension, the performance of the Russian oil sector’, it said yesterday – but unfortunately, it doesn’t have a great deal of leverage. And let’s face it: given the state of diplomatic relations between London and Moscow since the Litvinenko and British Council affairs, it can’t exactly rely on Foreign Secretary David Milliband to ride to the rescue.

This might seem like bog-standard dodgy emerging economy stuff (and BP isn’t quite the sympathetic brand it once was). However, this could end up hitting us all in the pocket: problems at TNK will slow Russian oil production, which is likely to push prices even higher. So let’s hope BP can pull this one out of the fire...

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