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BP Says It Is Committed to Russian Venture

BP Says It Is Committed to Russian Venture

Published: June 6, 2008

MOSCOW — The chief executive of BP, Tony Hayward, said Thursday that the company was committed to staying in Russia, even as its joint venture, TNK-BP, came under fresh pressure from the authorities investigating accusations of tax evasion.

Mr. Hayward told an annual shareholder’s meeting of Rosneft, Russia’s largest oil firm, that BP “has had a material business presence in Russia for almost 15 years” and would continue its work in the country.

“BP is committed to Russia,” he said. “Russia, alongside the Middle East, is one of the world’s greatest hydrocarbon provinces. But more than that, Russia is a great nation in the process of economic transformation.”

BP, one of the biggest investors in Rosneft, has faced a series of escalating problems at the joint venture, one of the largest in Russia. On Thursday, TNK-BP confirmed that Robert Dudley, the company’s chief executive since 2003, had been summoned by Russian regulators for questioning as part of an investigation into the tax activities of TNK from 2001 to 2003, before TNK-BP was created.

The company, whose fate has become a measure of the investment environment in Russia, characterized the tax inquiry as “a routine procedural matter.”

But foreign investors, as anxious to dip into Russia’s huge potential for wealth as they are wary of growing government interference, are likely to view the situation as more serious.

News of the tax investigation came as President Dmitri Medvedev prepared to assuage lingering uneasiness among foreign investors in a speech to representatives of the German political and business elite in Berlin.

Since taking office early last month, Mr. Medvedev, with his mentor, Vladimir V. Putin, now prime minister, has been eager to promote Russia as welcome to foreign investment.

“Almost everything Medvedev and Putin have done since the inauguration is to send signals that Russia is open for business,” said Roland Nash, the chief strategist at Renaissance Capital, an investment bank in Moscow.

The claims against TNK-BP, he said, “will be seen as a test case for whether that commitment is real.”

Mr. Dudley’s summons is his latest major headache in less than a week. Last week, a trio of TNK-BP shareholders called for his resignation, citing disagreements over his investment decisions and asset sales, and concern that he had been catering solely to the interests of the company’s British partners.

A spokesman for TNK-BP said the schism in the company’s board was not connected to Mr. Dudley’s summons for questioning.

Formed in 2003, TNK-BP has netted BP huge gains and accounts for about a fourth of the company’s global production.

As oil prices have spiked, however, the Kremlin has sought to take back lucrative energy assets. The problems plaguing the venture appear to many as an attempt to squeeze the company’s British partners out of the country.

Last June, BP was compelled to cede to Gazprom, the Russian government-run energy giant, its stake in the massive Kovikta natural gas field in Siberia, relinquishing a gas supply large enough to fuel much of Asia for five years.

Authorities have investigated BP’s Russian ventures for everything from tax fraud to environmental violations. In March, authorities raided the Moscow offices of TNK-BP and BP, confiscating documents and computer hard drives. Days later, a TNK-BP employee and his brother were arrested and charged with industrial espionage

 

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