Putin Urges TNK-BP Billionaires to Keep $28 Billion in Russia

President Vladimir Putin urged the billionaire shareholders of TNK-BP to bring back to Russia the $28 billion they’ll get for their half of the oil producer from state-run OAO Rosneft.

“I would very much like for them to invest the proceeds or a significant part in Russia’s economy,” Putin said today during a news conference with hundreds of journalists in Moscow.

Putin threw his support behind an initiative to repatriate as much as $1 trillion in capital held by companies and politicians abroad, calling for disclosure and limits on what government officials can own abroad during his state-of-the- union address last week. Russia may have net capital outflow of $67 billion this year after $80.5 billion last year, central bank Chairman Sergey Ignatiev said Dec. 19.

Rosneft agreed this year to buy TNK-BP in Russia’s biggest- ever acquisition from BP Plc (BP/) and AAR, which represents Mikhail Fridman, German Khan, Len Blavatnik and Viktor Vekselberg. BP will get $17 billion and 12.8 percent of Rosneft, while pledging to buy $4.8 billion of Rosneft stock from the state. AAR offshore vehicles will get $28 billion in cash.

‘Careful, Civilized’

Putin today said in response to a Bloomberg question that Russia should undertake “careful, civilized” measures to bring about the “de-offshorization” of the economy and lure capital from low-tax jurisdictions abroad.

Russia should seek agreements with offshore zones to compel disclosure of tax information and help reveal tax information and the end beneficiaries of companies, Putin said. The nation also needs to refine its legislation to better safeguard the interests of business owners and improve the investment climate, he said.

Putin said the TNK billionaires won’t be forced to invest the sale proceeds in Russia. “If we recognize the lawful, legitimate owners, if they earned their money legally, then it’s their business where they invest,” Putin said.

Government officials and executives from several Russian companies are in talks with “some participants in this deal” about investing the TNK-BP (TNBP) proceeds in the Russian economy, Putin said. “I hope they’ll decide in favor of investing in the Russian economy.”

BP and AAR signed separate binding agreements with Rosneft in the past two months to sell their stakes in TNK-BP, Russia’s third-biggest oil producer, ending a fractious, almost decade- long partnership. Now-BP Chief Executive Officer Bob Dudley was ousted as head of TNK by AAR after a shareholder battle in 2008. In May, Fridman quit as head of TNK-BP, saying the 50:50 partnership no longer served either side’s interests.

AAR declined to comment on Putin’s comments today.

To contact the reporters on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net; Torrey Clark in Moscow at tclark8@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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