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BP – Glutton for Punishment?

OB-MJ100_bp_E_20110204073659.jpgThis week’s press has unsurprisingly been awash with comments upon the Wikileaks revelations about BP’s traumatic interaction with TNK-BP, as well as its dispute-sparking new alliance with Rosneft.   The Economist provides a clear overview of the various involuted wranglings the British major has experienced in Russia since 2002, which begs the well-justified question of why Bob Dudley’s company is returning to the danger zone.  Where do they go from here?:

Now BP is in bed with Rosneft and has shaken hands with Mr Sechin, who is widely seen as the architect of the attack on Yukos, an oil firm that was dismantled with scant regard to the law in 2004. Yukos’s main shareholder, Mikhail Khodorkovsky, is now in jail. He was ostentatiously given a second prison sentence just as the BP-Rosneft deal was announced.

BP may become embroiled in the legal battle over Yukos’s assets, whichwere swallowed by Rosneft. But first the British firm faces a fight withMr Fridman. If BP assumed that its partnership with Rosneft meant thatMr Fridman would not dare to protest, and that Mr Sechin would alwaystake BP’s side, it may have miscalculated. The legal challenge from AARis said to come with the full knowledge and approval of the Kremlin. “BPhas a very simplistic view of the power structure in Russia,” says MrFridman.

AAR does not have any interest in destroying Rosneft’s $16 billion dealwith BP. But equally Mr Sechin is unlikely to stand in Mr Fridman’s waywhen he demands that BP compensate AAR handsomely. Rather than wantingto chase Mr Dudley away again, the Kremlin (and AAR) are keen to draw BPdeeper into Russian business and gain more influence over it. Rosneftwants to transform itself into a respectable global oil firm, using itsrelationship with BP as a stepping-stone.

BP must surely have its qualms about this; but all the parties’interests are at least aligned on one thing. They want those Arcticoilfields to make money. As Mr Dudley affirmed this week, BP’s long-termstrategy is to keep searching for oil, which is more lucrative thangas. And with more and more of the world’s oil being produced bystate-owned oil firms, private ones need to go to greater extremes, bothtechnologically and politically, to stay in the game.