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The Guardian: BP faces Kremlin tax investigation·Russian joint venture may face £21m evasion charges

·Move follows spying arrest and row over staff visas

Terry Macalister
Wednesday March 26 2008

BP is facing a criminal investigation into the tax affairs of its Russian joint venture, TNK-BP. It has been forced to recall nearly 150 staff to the parent group amid mounting speculation that the Kremlin is using the strong-arm tactics it used against Shell to press the venture into handing over part-control to the state.

The Russian interior ministry said last night it was looking into a possible tax evasion worth 1bn roubles (£21m) at Sidanco, a business that was merged into TNK-BP in 2005. TNK is owned 50/50 by the British group and three local oligarchs.

“The investigative department of the ministry has opened a criminal investigation against Sidanco according to the article 199 of the Criminal Code, part 2 – large-scale tax evasion,” said Angela Kastuyeva, spokeswoman for the department. BP in London declined to comment.

The latest move follows the arrest of an employee last week on industrial espionage charges, the announcement of an investigation into possible environmental violations at the company’s biggest oil field, Samotlor, and problems with visas that have hit 148 of its staff.

Russia’s president-elect, Dmitry Medvedev, insisted in a newspaper interview yesterday that actions against TNK-BP were not politically motivated and had nothing to do with recent strained relations between London and Moscow. Analysts see clear similarities to the way Shell was treated before being made to hand part of its Sakhalin-2 project to state-owned oil and gas group Gazprom.

A spokeswoman for TNK-BP confirmed that 148 employees were moving back to BP owing to “a lack of clarity over their current visa status”. Those affected were mainly engineering and technical staff, she said. Forty senior managers were unaffected by the recall.

The 148 secondees will stay in Russia but move to the much smaller BP office. If the visa problems are solved, they will return to TNK-BP.

The Kremlin has been consolidating its presence in the oil sector, partly through the use of Gazprom, which has already muscled its way into TNK-BP’s Kovykta scheme in Siberia.

Gazprom and BP have been talking about a wider partnership amid growing expectations that the state-owned group might buy the 50% holding in TNK controlled by Mikhail Friedman, Viktor Vekselberg and Leonid Blavatnik. The three billionaires were locked into holding shares in the joint venture until the end of last year but are now free to sell.

The pressure on BP comes as relations between London and Moscow have sunk to their lowest point since the cold war after a row over Russia’s refusal to extradite Andrei Lugovoi, a former KGB agent wanted for trial over the murder of Alexander Litvinenko, a Kremlin critic in London.

The dispute has led to diplomats being expelled from both countries and the forced closure of two regional offices of the British Council.

In an FT interview, Medvedev said he was open to repairing relations with Britain and insisted it was London, not Moscow, that had initiated curbs on relations. “It is not a tragedy. We can restore the whole volume of full bilateral cooperation, of course, without preliminary conditions, understanding the independence of each others’ positions.

“After my election to the post of president, [Gordon] Brown was one of the first to congratulate me. We are open to the restoration of cooperation in full.”

This article appeared in the Guardian on Wednesday March 26 2008 on p22 of the Financial section. and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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