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Head of BP Venture, Citing Harassment, Leaves Russia

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Head of BP Venture, Citing Harassment, Leaves Russia

Executive’s Departure Could Threaten 
British Oil Giant’s Sway Over TNK-BP
By GUY CHAZAN
July 25, 2008; Page B1

LONDON — Robert Dudley, head of TNK-BP Ltd., abandoned Russia after what he called “sustained harassment of the company and myself,” in a major setback forBP PLC in its battle with its Russian partners over control of the joint venture.

Mr. Dudley left Thursday for an undisclosed location after Russian authorities declined to issue him a new work visa. His departure could mean that BP, which owns half of TNK-BP, will lose effective management control of a company that accounts for a quarter of its global oil production.

In an interview, Tony Hayward, the company’s chief executive, said BP would fight back, and could take legal action against the venture’s Russian shareholders. “We intend to defend our rights using all legal means at our disposal,” he said. “We’re not going to be intimidated by strong-arm tactics.”

For months, Mr. Dudley and TNK-BP have faced a barrage of investigations, proceedings and inquiries amid a shareholder dispute that has at times threatened to paralyze the company.

His departure is likely to dismay Western businessmen and governments watching events at TNK-BP for signs of Russia’s direction under Dmitry Medvedev, its new president. Mr. Medvedev says he wants to improve the rule of law in Russia, and many view the fate of BP’s venture as a litmus test.

Lord Robertson, a former British defense minister and TNK-BP board member, blasted the venture’s Russian shareholders for a “focused campaign of harassment” that appeared to have supporters in the Russian government. The partners, who hold their 50% stake in TNK-BP through the AAR consortium, dismiss BP’s claim they have orchestrated the administrative pressure on TNK-BP.

Speaking at the Nixon Center in Washington, Lord Robertson said he was “mystified” the Russian government “cannot see that these shareholders’ actions are inimical to Russia’s national interest.” British Prime Minister Gordon Brown and European Union officials have repeatedly raised concerns with Russia’s government over the dispute, yet the pressure on TNK-BP has continued.

The Russian government has said it doesn’t want to get involved in the fight.

People close to BP say TNK-BP’s troubles stem from a Kremlin drive to transfer control of the company to a state entity like OAO Gazprom, leaving BP as a minority partner.

In the interview, BP’s Mr. Hayward denied the dispute threatened the British oil giant’s presence in Russia, the world’s second-largest oil exporter after Saudi Arabia. “I don’t think this is the end of BP’s investment in Russia,” he said. “[But] it does signal that we have entered a new phase in the conflict between BP and AAR.”

In a statement, Mr. Dudley said he was leaving Russia only temporarily and would run TNK-BP from outside the country. He said he had been advised such a scenario was “lawful and better for all shareholders than the alternatives,” adding that he hoped administrative pressure on TNK-BP would now ease. BP said Mr. Dudley continued to have its full backing.

BP said it didn’t know where Mr. Dudley had gone, and acknowledged that he had made the decision to leave Russia unilaterally. A person close to the company said it wouldn’t be “feasible” for him to run TNK-BP this way for an extended time.

His flight from Russia was a clear victory for AAR, which called it a “vivid demonstration of BP’s treatment of TNK-BP as a wholly-owned subsidiary.”

“TNK-BP is an independent oil company in which BP is not a controlling shareholder,” Mikhail Fridman, chairman of the TNK-BP board, said in a statement. He insisted that BP nominate a “new independent CEO who would be based in Moscow and manage TNK-BP in the interest of all shareholders.”

–Neil King Jr. in Washington contributed to the article.

Write to Guy Chazan at [email protected]

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