April 24, 2008 By Robert Amsterdam

Time for BP to Rethink its Russia Strategy

BP_art.jpgSome time ago, BP got into big trouble with the Russian authorities – call them a collateral casualty of the lawlessness kicked off by another well known expropriation. But clearly the corporation has been following a strategy to resolve this longstanding problem, dating all the way back to Lord Browne’s tenure as CEO. Stay quiet, deny the existence of the problem, and hope that by placating the aggressive elements within the government (never for a moment assume that everyone in the Kremlin wishes BP such harm) that eventually the problem with resolve itself. One can understand why BP has chosen to tread so carefully – subsidiary TNK-BP is responsible for almost a quarter of the company’s oil production, and represents one of the most critical strategic growth markets for the corporation. However the back channel strategy has not worked, in fact, it is painfully failing, as we see from the recent reports of an oppressive new $256 million back tax claim, rumors that Gazprom will take over the company for $20 billion, and signs of increasing impatience over stalled production at Kovykta (see FT article after the jump). It might be time for Mr Hayward to consider a more public, political approach – before shareholders begin to ask the difficult questions.