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Comment: BP and a case of Russian bullying
Evening Standard29 Jul 2008
BP has turned in strong second-quarter results which will inevitably prompt cries of profiteering, even though most of the gains do not come from selling petrol at the pump. More importantly, however, for a group which not long ago paid a sixth of all the dividend income earned by UK pension funds, is the fate of its strategic stake in Russia. The company's joint venture there, TNK-BP, accounts for a quarter of the output of the group. Five years ago the 50:50 deal was hailed as a strategic coup for Britain's biggest oil company, ensuring access to plentiful reserves far from the troubles of the Middle East. Now, however, the four oligarchs who control the other half of the venture want a bigger slice of the action.
The British chief executive, Robert Dudley, has left Russia for a secret location, after repeated attempts to embroil him in criminal investigations. And after gamesmanship by officials over work permits, BP's entire technical staff have left the country. The oligarchs deny claims that they have recruited the authorities to harass BP, though the Foreign Office believes otherwise. It is clear that the Kremlin's failure, at the very least, to defend a venture once personally backed by Prime Minister Putin is a warning sign to other foreign investors.
Russia badly needs external expertise and access to foreign markets. Yet after the assassination of Alexander Litvinenko in London, there are fundamental questions over the Kremlin's ability to ensure the rule of law. The way BP, and Shell before it, is being treated hardly helps. Russian share values fell by five per cent the day Mr Dudley left the country. BP and its oligarchs may eventually reach a rapprochement because the latter need its technical know-how, while high oil prices mean Russia needs foreign capital less than it did - for now. However, Russia needs to be aware that in the City and other financial centres, the harassment of BP's executives will not be forgotten.
