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NEW EUROPE: Kremlin Inc puts TNK-BP in its crosshairs

Author: Kostis Geropoulos
31 March 2008 – Issue : 775

UK oil giant BP downplayed the recent pressure piling on its Russian joint venture, TNK-BP. “What tension are you referring to? Where have you heard tension?” BP spokesman Toby Odone asked, laughing. The Russian Interior Ministry said the firm had violated immigration law by obtaining business visas instead of work visas for dozens of foreign employees. BP has temporarily withdrawn 148 staff working on secondment at TNK-BP because of visa problems. “They have not been recalled. They were asked not to go to work at TNK-BP until we get their visas.

They do have visas but the process of issuing visas has changed,” Odone told New Europe on March 27, adding that they were trying to get the visa requirements sorted out. He said the visa issue was a technical matter. Earlier last week, the Russian Natural Resources Ministry said it would inspect TNK-BP’s largest oil field Samotlor for environmental violations. “RosPrirodNadzor is going down and doing an inspection every two years,” the BP spokesman said, adding that it is the environmental agency’s responsibility to inspect every field in the country. He noted that the company would wait for RosPrirodNadzor to complete its inspection. “We don’t know anything until they do it,” he said, adding that TNK-BP would cooperate with the authorities.

The environmental inquiry into Samotlor field will be led by Oleg Mitvol, head of RosPrirodNadzor. The announcement of the inspection came after security services raided the TNK-BP and BP offices in Moscow and arrested a TNK-BP employee and his brother for suspected industrial espionage.

The employee, Ilya Zaslavsky, and his brother, were both members of the British Council’s Alumni Club in Moscow. They were accused by the FSB of seeking to obtain classified information from Russian oil companies for the benefit of foreign rivals, The Times reported. Moscow and London have clashed over Britain’s demand that Russia extradite the chief suspect in the fatal poisoning in London of Alexander Litvinenko and Britain’s refusal to hand over Boris Berezovsky and other Kremlin foes for prosecution. Tension escalated earlier this year when Russia forced the closure of two offices of the British Council. The Russian authorities accused the cultural organisation of spying.

Analysts have suggested that the pressure on TNK-BP may be connected with the desire among some Kremlin officials to replace BP’s Russian partners with a state-controlled company, such as Gazprom or Rosneft. BP owns half of the TNK-BP venture. The rest is shared by a consortium of oligarchs, Michael Fridman, Viktor Vekselberg and Len Blavatnik. The Kremlin has already swallowed Russia’s largest major, YUKOS, and sent its boss Mikhail Khodorkovsky to jail. “It is the continuing process for Russians trying to effectively take control of their asset. They still feel that these assets were sold way too cheaply, the deals were too one-sided and they are trying to get them back,” Justin Urquhart Stewart, director of Seven Investment Management in London, told New Europe. “BP doesn’t see that in the slightest issue.

I think they see it as a fair deal. But you can see a consistent issue here of what happened with Shell at Sakhalin.” Urquhart Stewart said BP would be put under further pressure after these events. Although the investigation at Samotlor was described as routine, Mitvol led the inquiry into Shell’s gas development on Sakhalin Island in Eastern Siberia that ultimately led to Shell’s loss of control of the project and the transfer of a majority shareholding to Gazprom. Shell was relentlessly pursued for environmental violations and was threatened by huge fines before transferring control to Gazprom. Mitvol’s attacks on Sakhalin ceased after its transfer to the state-controlled gas giant. At the end of 2006, TNKBP produced 1.7 million barrels of oil per day and had reserves of 7.8 billion barrels – which is equivalent to a large multinational oil firm. Samotlor is one of the world’s largest oilfields and during its peak output in the 1980s, produced a quarter of Russia’s oil.

However, BP spokesman Odone told New Europe that “basically Samotlor is a field in decline,” but BP managed to turn it around and boost production using modern drilling technology. “It is a very old field, it’s not like a new field,” Odone said. “But, it is still producing pretty big volumes.” The Kremlin may have put TNK-BP, Russia’s fourth largest oil producer with profits of USD 6.6 billion in 2006, in its crosshairs. Gazprom Chairman Dmitry Medvedev takes over the country’s presidency from Vladimir Putin, who’ll become prime minister. The TNK-BP case suggests that it will be business as usual. Kremlin business, that is. “It is certainly affecting the investment climate and the fact that Medvedev is coming in, I don’t think it will have too much effect because of course the power will lie increasingly with the new prime minister and what surprise … that will be,” Urquhart Stewart said. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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