BP Rosneft injunction implications
25 Mar, 2011 09:18
After the proposed share swap and Arctic development joint venture between BP and Rosneft was held up by a decision of the Stockholm Arbitration court, Business RT spoke with Ben Aris editor-in-chief at Business New Europe about the implications.
RT:The Russian shareholders have always wanted to get in on this deal.What do you think the next move by the Russian shareholders of TNK-BP will be?BA:“Well it’s all come as a bit of a surprise, I mean the Rosneft BP deal was a key one for the Kremlin as part of their energy strategy, and then, out of the blue, comes TNK-BP, complaining about this.However from the beginning there was an issue over the shareholders agreement between TNK and BP, and, to my mind, it looks like BP here is a bit guilty of playing things by Russian rules, insofar as they are the ones guilty of bad corporate governance.They have chosen to ignore an issue with their shareholder agreement with their existing partners, in TNK and gone ahead and done a deal with the powers that be.And you can see why as well.Russia already accounts for the lions share of BP’s oil, and going forward, Russia is the place where all the oil is to be found and elsewhere dwindling reserves.And so throwing themselves in with the Kremlin state owned company, Rosneft, who can actually provide them access to oil is very important.But it throws up the question of how do you do things in Russia? Do you do the powerplay deals with the Kremlin or do you do it with rule of law and stick to your shareholder agreement?”RT:What would you say that TNK-BP now stands firm when it comes to negotiating terms and participating in this deal?BA:“Well they have certainly got themselves into a good position in that this deal has been frozen.But then on their side it is a bit disingenuous as well, insofar as, here they are screaming corporate governance, shareholders agreement, and yet the oligarchs who control TNK will only choose to follow shareholder agreements when it suits them.If you think back a couple of years, with Bob Dudley, the head of BP himself, was actually forced out of the company and had to leave Russia when TNK threw a whole book of dirty tricks at him in order to squeeze him out.And here they are now, badgering the government, and BP to get back in on the deal.”RT:What kind of other partners may Rosneft consider for this deal?BA:“Well there’s a deadline.April 14th I think.After which this deal expires.So we have a window here of about 3 weeks and the warring parties could come to some sort of deal.If they don’t then the deal evaporates and there is no upside either for BP or TNK.So it is possible they will resolve it relatively quickly.If they don’t then the game opens up and it is possible they could bring in another oil company.”RT:What's all this doing to BP's image, especially after the Gulf oil spill?BA:“It’s not good, but I think at the end of the day they are focused mainly on oil.The company exists on oil production and they need those reserves and those reserves are here in Russia in copious amounts.And, so, I think they are focused on that.At the end of the day oil is a commodity and people put it into the commodity market – it doesn’t matter where it comes from.So as long as they are producing oil they are making money.That is the bottom line.”RT:Do you think the Russian government has the power to push this deal through?BA:“Well, this is the interesting question, in will they act? Is there going to be some payback for TNK if they make too much of a fuss? Are we the rule of law? Does the shareholder agreement count for anything? And so the resolution of this will be very interesting, as to how it actually plays out.”