BP and Rosneft and what lay ahead

With the proposed share swap and joint venture between BP and Rosneft seemingly at a standstill after the expiry of a second deadline for the share swap to occur, Business RT spoke with Konstantin Simonov, head of the National Energy Security Fund.

RT: So is this the end or just another twist in the negotiating process?

KS:“According to my information Rosneft didn’t say any official position, but that is why it is my personal view, in my opinion of course it is the end of the story. There will be no deal between BP and Rosneft. And why?Because you mentioned about this $32 billion as a proposal of BP and Rosneft to AAR, so in my opinion it was an excellent proposal.Why? Because you can remember, the price of TNK-BP at the beginning of this year, the whole company, was $41 billion.So they said that ‘we can give you $32 billion for the half of the company’ so it is an excellent deal.But you didn’t mention one thing.It was not only about cash, BP decided to give more than 6% of the shares of the BP company, as you know, during these four months, there were a lot of rumours about the position of AAR, but their position was that they, AAR consortium, wanted not only cash, but some share in BP company.BP said ‘OK, we will give you 6% of our company, but not from this 5% that we want to give to Rosneft company.So that is why, my idea is very simple, AAR has no economic reasons for its position, so that is why it is politically motivated decision. It is politically motivated behavior, that is why the main idea of AAR is to destroy this deal between BP and Rosneft.That is why in my mind there is no reason for Rosneft to continue these negotiations, because in my opinion they give an extra excellent proposal, and if AAR decided to say no, they will say no for all other ideas of BP and Rosneft.That is why I am sure it is the end of this story.”

RT: Both Rosneft and AAR have previously threatened to sue BP for compensation. Does either have a case, and what might BP stand to lose?

KS:“So, as I said in my opinion, so main motivation of AAR was not to earn money, their main motivation was to destroy this deal.So, it is very interesting, why our private companies wanted to destroy the partnership between BP and Rosneft, and why they didn’t want to see Rosneft as a shareholder of BP company, but we see that it was the real policy. I cannot give the answer what is the final motivation, what is the final reason of AAR, but I am sure they wanted to destroy this consortium.And in my opinion, if they wanted to destroy BP, the main idea, the main reason of BP in this deal was to take part in this Arctic project, the main reason of Rosneft, of course, was to takethis 5% of BP company, because it was important, if we are speaking about cooperation between Russian companies and foreign companies, but of course, it is very interesting what is after the close of this deal.”

RT: You don’t think they are in a position to be sued?

KS:“I am absolutely sure that the Rosneft company, now, I don’t know what will be the reaction of BP, because BP in my opinion, made a serious mistake.They didn’t ask the signature, because, I am absolutely sure that AAR had information about this deal before.You cannot imagine that Mr Fridman did not know about the future deal between BP and Rosneft.But in my opinion the behavior of BP was like, you know, their opinion about the right behavior in Russia.So they did not ask the signature, it was like unformal agreement, and Fridman maybe said ‘OK guys I am not against it’ but then he began to behave as European businessman, ‘where is my signature, let’s go to the court’ and so on. If Rosneft go to the court of course and ask for the very serious compensation, because in my opinion there are a lot of arguments to explain the position of AAR, and the main reason of AAR was not to take part in this deal, not to be the third part of this story, but to destroy this deal, and that is why Rosneft will ask for the serious compensation.”

RT: Sources say Rosneft is now looking for a new arctic partner, who fits the bill?

KS:“It is an interesting question because, I am absolutely sure that there are lot of foreign companies which want to take part in this Arctic deal, because Arctic is the future of oil industry and that is why I think all European and American oil majors can be the partner in this story.But there is one serious problem.Who will give you the shares, because I am absolutely sure that for Rosneft it is not enough just to find a partner.The main idea was not to find a partner in these Arctic deals, to develop the Kara Sea, the reason was to find the partner who will give you share in the company.It will be the main problem, to find the company which can give you 5% of its share.”