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Moscow axes work visas for TNK-BP

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Moscow axes work visas for TNK-BP

By Catherine Belton in Moscow and Ed Crooks in London

Published: June 30 2008 23:34 | Last updated: June 30 2008 23:34

BP’s grip on its Russian oil joint venture was slipping on Monday after authorities in Moscow refused work permits to many of the company’s foreign executives in a ruling that could see all of them forced out of the country by the end of the month.

The ruling is the latest twist in anacrimonious struggle between BP and its Russian partners over control of the TNK-BP joint venture. It means Robert Dudley, the BP-backed chief executive of the joint venture, along with its chief financial officer and a number of other executives will have to leave Russia unless they can secure visas rapidly. Their departure would leave operational control of the company in the hands of their Russian partners.

The hearing at the Moscow city government was held last week – at the same time as TNK-BP Holdings’ annual meeting, an event that Mr Dudley had to attend. TNK-BP said his place at the work permits hearing was taken by more junior staff who found their case contradicted by Viktor Vekselberg, one of the four Russian tycoons and partners in dispute with the UK oil group.

The authorities duly approved a quota of fewer than half the 150 permits sought.

BP described the ruling as “utterly disgraceful”. TNK-BP’s foreign executives will on Tuesday make a last-ditch appeal to the authorities in an effort to safeguard the future of the non-Russian employees.

The visas of all TNK-BP’s non-Russian staff expire by the end of the month. To secure new visas they need work permits and even those likely to be granted permits no longer have time to process their applications. They would therefore need special permission to stay in Russia, and there has been no indication that this will be given.

One insider said: “We’re all out of here at the latest by the end of July.

“With all the best will in the world, there is no time.”

People close to the company fear the wrangle over permits is part of an effort by the Russians to gain control by stealth.

The executives’ departure will mark the first real consequence of a corporate battle that came into the open last month with BP accusing its Russian partners of “corporate raiding”.

People close to the company have suggested the Russian shareholders are laying the ground for a sale to a state-owned company such as Gazprom or Rosneft. But the Russian shareholders have repeatedly denied they want to sell.

The Russian billionaire shareholders say they are launching a legal case to win Mr Dudley’s dismissal and cut numbers of expatriate staff because BP was running the group as its own subsidiary.

Separately, 148 BP specialists seconded to TNK-BP have been barred from the company since April firstly because of visa problems and then because of a court injunction barring them from work after a shareholder filed suit against their employment deal.

Lombard: Hayward’s dilemma

The Russian tycoons that are BP’s partners in TNK-BP seem to have engaged Tony Hayward, the oil group’s chief executive, in a game of chicken. They are trying to cut the number of foreign employees at the Russian joint venture – a move that can only reduce the value of the business to both parties.

For the Russians, creating turbulence may prove a path to taking full control of the venture if BP, saddled as it is with quarterly reporting obligations, loses patience and pulls out. Perhaps they suspect weakness in BP’s management, as Mr Hayward has been in harness for more than a year. And with little negotiating leverage, it may be rational for him to give in.

But the least-worst option for BP is probably to hang on in there, and hope that the Russian government pushes TNK-BP into a deal with state-controlled Gazprom or Rosneft. Still, BP investors should expect things get worse before they get better.

For more Lombard, clickhere

EDITOR’S CHOICE

Showdown in Moscow for BP and investors – Jun-11

Copyright The Financial Times Limited 2008

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