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Daily Telegraph: BP must watch its step when dancing with the bear

24 March 2007

BP is playing a high-risk game in Russia. Bidding for the bankrupt Yukos’s stake in energy giant Rosneft is fraught with complications, but in the current climate maybe Lord Browne and Co felt they had little choice.

BP is a sizeable player in the Russian oil and gas industry through its 50pc stake in TNK-BP. But there is a problem: President Putin wants to return Russia’s prize energy assets to state control. Among other things, Moscow desires control of TNK-BP’s vast and potentially very lucrative Kovykta gas field.

BP could either resist or go with the flow. The first option is futile, as Shell found to its cost over the Sakhalin 2 gas field. The other option? To invest further in Russia and form more ventures with Rosneft and Gazprom.

There is talk BP is involved in the auction as a figleaf to dignify Rosneft’s eventual takeover of the Yukos assets. Given its problems elsewhere, BP needs to take care its reputation does not suffer further.

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