Vladimir Putin is running Russia again (did he ever really go away?) and BP CEO, Bob Dudley, is tiring of doing business in the world’s largest mafiocracy – again
Dudley’s relationship with the power centres in Russia has always been a rocky one at best, having effectively fled the country in 2008, after falling out with his partners in the TNK-BP joint venture amidst claims he was also the victim of a campaign of harassment on the part of local government officials.
Now Dudley is looking to exit Russia for good after confirming the UK oil major’s 50 percent stake in the TNK-BP operation is up for sale, leaving his partners – the AAR consortium – headed up by oligarchs Mikhail Fridman, Len Blavatnik, Viktor Vekselberg and German Khan – to slug it out with a Russian government intent on consolidating its grip on the domestic oil industry.
Giving up an estimated 25 percent of the company’s current oil and gas production doesn’t, on the face of it, make much sense. And then there’s the $64,000 question regarding how much he’ll realise from any sale.
Anything close to the $25-30bn being bandied about will be seen as a ‘result’ and provide the necessary platform for growth opportunities elsewhere – once BP shareholders have been pacified with a cash payout, of course.
A major source of the recent tension between Dudley and his AAR partners was BP’s decision last year to bypass them by striking an Arctic exploration deal with state-owned Rosneft – a deal subsequently thrown out by the courts for contravening the existing TNK-BP shareholder agreement, under which BP was barred from dealings in Russia outside of the joint venture.
BP subsequently offered to buy out AAR for around $32bn, with a plan to sell the stake on to Rosneft. That deal fell apart and AAR subsequently initiated legal proceedings against BP.
As a result, Dudley now has his work cut out. Getting out of Russia may be the easy part if Putin decides to run roughshod over the oligarchs. The trick is getting out at the right price. And with the most likely suitor being Rosneft, there’s no guarantee of that.
Even if Dudley does manage to extricate BP from Mother Russia at a fair price it may only be the start of his problems – especially if BP’s major western rivals see this as an opportunity to take out the firm on the cheap.
These are uncertain times for Dudley and for BP.
