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Is TNK-BP a Resource Nationalism Case?

BP_art.jpgLately it seems unclear whether or not all of BP’s problems with its Russian subsidiary TNK-BP, which have included arrests, office raids, and visa problems, are related to a campaign from the government to take over a majority stake – or rather just enduring conflicts with their private sector Russian partners, the immensely powerful billionaires Len Blavatnik, Viktor Vekselberg and Mikhail Fridman. Many have observed these moves from the Kremlin as a prelude to expropriation, but a new report from the Wall Street Journal speculates that all of TNK-BP’s problems may just be infighting among shareholders – shareholders who frequently can wield powers of the state to pressure each other. My view: we can see that in an effort to discourage Blavatnik, Vekselberg, and Fridman from selling stakes to state-owned firms, that BP is pushing hard for an enormous cooperation agreement and asset sharing partnership with Gazprom – probably along the lines of what happened to Eni. It seems a frequent negotiating tactic for Gazprom to corner the multinationals into these kind of deals, appearing as the savior and guardian angel to the very problems they themselves are creating. However, when corporations are under the gun to align themselves with the monopoly, it is consumers and competition who become the real victims. Gregory White and Guy Chazan report:

The drumbeat of difficulties led to comparisons to the troubles Royal Dutch Shell PLC faced in 2006 before it sold control of its Sakhalin-2 project to Gazprom. But people close to TNK-BP, and other industry officials following the situation, say there has been no sign of the concerted pressure that preceded Shell’s troubles. The spy probe, for example, appears dormant, say people close to the company. The visa problems were resolved within days of BP going public about them. And while Gazprom in the past expressed interest in buying out the Russian shareholders in TNK-BP, people close to all sides say no talks have been held. BP’s discussions with Gazprom have as yet yielded no deal.Amid this uncertainty, people close to BP say the company believes the Russian partners are maneuvering to gain leverage in the event they sell out. The Russian shareholders, meanwhile, suspect BP is negotiating over their heads in its talks with Gazprom, according to people familiar with their thinking. They also say BP isn’t careful enough about costs at TNK-BP, where it has management control. “The problem with BP is they don’t pay attention until there is a crisis,” said a person close to the Russian holders.The flash point at present is the 148 specialists — BP employees assigned to TNK-BP to help in matters like planning where and how to drill wells. BP officials argue that their skills are vital. The Russian shareholders have questioned the cost — in some cases as much as $1 million a year in salary, benefits and overhead.Just as the visa problems were clearing up, the court order announced Wednesday forced BP to suspend the specialists’ work again. The order, issued last week in the Siberian city of Tyumen, came in a suit brought by Moscow brokerage ZAO Tetlis. It owns a small stake in a publicly traded unit of TNK-BP, and it alleged that the fees TNK-BP pays for the BP specialists amount to an illegal dividend for BP. The next hearing is scheduled for Tuesday.TNK-BP says the claim is baseless and will fight it, warning that the prolonged absence of the specialists could damage TNK-BP’s ability to produce oil. People close to BP said they suspect it was instigated by Alfa Group, one of the Russian shareholders and a company known for using aggressive tactics against rivals. Tetlis executives couldn’t be reached to comment, but several worked for Alfa companies in the 1990s, according to biographies on the company’s Web site. An Alfa spokesman didn’t respond to requests for comment.Mr. Hayward, BP’s CEO, has complained about TNK-BP’s troubles in conversations with Alfa chief Mr. Fridman, according to people familiar with the discussions. Alfa officials have denied any involvement, these people said.