The BP Scandal in Russia Gathers Momentum

It appears that shareholders at BP are beginning to register their disgust and anger over management’s recent decision to play a role in the Yukos auction.

Shareholders say BP “was not without choices” when confronted with Russia’s energy blackmail. (image: “BP Exec – Nick Turner)

FT Article: Anger at BP role in Yukos auction

Some of the largest shareholders are concerned that the UK oil company has harmed its reputation by allowing its Russian joint-venture, TNK-BP, to join a bid for Yukos assets with the state-run Rosneft. No other participants entered the auction. TNK-BP pulled out after 10 minutes, leaving Rosneft to win the bid, paying $7.9bn for a stake in its own company. Analysts say the auction was set up to favour Rosneft and TNK-BP’s participation fulfilled legal requirements that an auction have at least two bidders. Shareholders opposed to this action say they realise that BP is operating under difficult conditions and may want to win favour in Moscow. But it was not without choices, they say.

It goes without saying that if a country has to blackmail other companies into participating in energy auctions (by mounting a quasi-legal/regulatory attack on a major investment from the environmental ministry, for example), than the legality of the property for sale is highly questionable.