Royal Dutch Shell Plc  .com Rotating Header Image

BP Sues TNK-BP Russia Partners

The Wall Street Journal Home Page

BP Sues TNK-BP Russia Partners

Action Is to Recover 
$370 Million Debt; 
Venture Rift Widens
July 5, 2008; Page B6

MOSCOW — Fighting back amid a deepening rift within its TNK-BP Ltd. joint venture, BP PLC has sued its Russian partners to recover a $370 million debt.

Getty Images
In front of the offices of TNK-BP in the center of Moscow.

BP filed the suit against the Russian partners — led by billionaires Mikhail Fridman, Viktor Vekselberg and Len Blavatnik — in High Court in London on June 30, a spokesman said.

The debt stems from back-tax claims predating the creation of TNK-BP against one of the companies that the Russian partners put into TNK-BP when it was set up in 2003. A representative of the Russian shareholders said they viewed the amount BP is claiming as “inflated” and would fight the suit.

Relations between BP and its Russian partners have worsened sharply in recent months, with the Russians charging BP with mismanagement and the British company accusing its partners of trying to take over the 50-50 venture by stealth. The battle is playing out amid widespread expectations that a state-controlled company like OAO Gazprom ultimately is likely to take a stake in TNK-BP.

Adding to the tension has been a wave of regulatory and administrative pressure on TNK-BP, particularly on foreigners in top management, some of them BP veterans.

Earlier this week, immigration officials promised to renew work permits for 49 foreign executives, including TNK-BP Chief Executive Robert Dudley, promptly after the company had warned that delays in approvals could mean that many would have to leave Russia. TNK-BP also is seeking permits for about 36 more foreigners working at the company, and regulators have signaled some willingness to consider those, suggesting no more than a few foreigners would be forced to leave, according to people close to the company.

People close to BP said softening of the official position on work permits could be an effort to reduce potential bad publicity from the conflict at next week’s Group of Eight summit in Japan, the first such meeting attended by newly elected Russian President Dmitry Medvedev. Western leaders are expected to raise the TNK-BP situation in private meetings with Mr. Medvedev.

In recent weeks, foreign leaders and other officials have raised the conflict with their Russian counterparts repeatedly, highlighting what BP alleges is manipulation of regulators and courts by its Russian partners.

Publicly, Russian officials have said the conflict is one for the shareholders to resolve, though some have admitted in private conversations that administrative pressure is being abused, according to people familiar with the discussions. The Russian shareholders deny they have orchestrated a squeeze on TNK-BP.

But people close to both sides said they expect the pressure to resume later next week, with a series of court hearings scheduled, as well as continued inspections by labor and other regulators. The Russian shareholders also are renewing their push to remove Mr. Dudley as CEO and could bring that issue to court in Russia in a bid to overcome BP’s opposition.

Top BP officials and the Russian shareholders are likely to meet July 11 at a board meeting of TNK-BP. Several previous sessions have broken up acrimoniously.

Discussions on the outlines of a settlement are moving slowly, according to people close to the talks. “We’re nowhere near agreement,” said one person close to BP.

The Russian shareholders are pushing for ways to raise the valuation of their stake, including possibly swapping their TNK-BP shares for stock in BP at some point in the future. But the British company would only agree to a deal that would raise its stake with approval from the Kremlin and a commitment from a state company to take ultimate control over TNK-BP, given the Kremlin’s clear preference for local ownership of large energy assets.

The Russian shareholders say they don’t intend to sell out in the short term, but acknowledge that, as financial investors, they are likely to ultimately seek an exit.

Write to Gregory L. White at [email protected] and Guy Chazan at [email protected]

[nowides]MORE ON TNK-BP



This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Comment Rules

  • Please show respect to the opinions of others no matter how seemingly far-fetched.
  • Abusive, foul language, and/or divisive comments may be deleted without notice.
  • Each blog member is allowed limited comments, as displayed above the comment box.
  • Comments must be limited to the number of words displayed above the comment box.
  • Please limit one comment after any comment posted per post.