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BP chief Tony Hayward warns Russia that rule of law is key

telegraph.co.uk

BP chief Tony Hayward warns Russia that rule of law is key

By Russell Hotten, Industry Editor

Last Updated: 6:42am BST 06/06/2008

BP’S chief executive Tony Hayward has warned that Russia must respect property rights and the rule of law if its rapid economic development is to be maintained. 

Mr Hayward, in Moscow as tensions mount over the future of the company’s Russian joint venture, TNK-BP, said that the UK company was committed to Russia. 

Mr Hayward, speaking to shareholders in Rosneft, the state-owned oil company in which BP has a stake, did not mention the TNK-BP situation directly. But his comments will be interpreted as a warning about the pressure being put on the joint venture. 

Mr Hayward said that three things were needed for continued economic transformation: “A fiscal framework that encourages investment; respect for property rights; the consistent application of the rule of law.” BP insiders believe the last two are not being applied with regard to TNK-BP.

  BP chief executive Tony Hayward has warned the Russia that the rule of law is key
Hayward has warned Russia that the rule of law is key
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  • BP is currently locked in battle with its Russian partners over the future of the joint venture. Raids on the company’s Moscow offices, an injunction against BP staff being seconded to TNK-BP, and the questioning by tax authorities of the joint venture’s chief executive, Robert Dudley, are all seen as attempts to destabilise the UK company.

    On Wednesday, the European Commission’s external relations commissioner, Benita Ferrero-Waldner, told Russia’s deputy prime minister, Igor Sechin, that Brussels was monitoring the situation over TNK-BP. In a telephone conversation, the two spoke about the general business climate in Russia and security of investment.

    But, said one source: “You can’t go around threatening Russia, but Sechin was left in no doubt that TNK-BP was a bellwether for future investment.”

    Last week, the Russian billionaires who control 50pc of TNK-BP – Len Blavatnik, Mikhail Fridman, German Khan and Viktor Vekselberg – called for Mr Dudley’s dismissal, claiming that he was putting BP’s interests before their own. Mr Hayward rejected the request and BP yesterday again affirmed its 100pc commitment to Mr Dudley.

    Then, on Wednesday, Mr Dudley was summoned to the interior ministry as part of a criminal investigation into possible tax evasion.

    Investors appeared to shrug off the news, with BP’s shares closing up 2 at 583p yesterday.

    But Citigroup analyst James Neale said: “Our fear is that the news [about Mr Dudley] may represent the next phase in attempts to put pressure on the chief executive and the organisation to bring the TNK-BP resources under state control.” It is thought that BP partners may want control of the company so that they can sell to Gazprom.

    Mr Hayward, who is to attend an economic forum in St Petersburg this weekend, was hoping to meet some or all of his Russian partners during his visit.

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