How BP's Deal Oils The Wheels

The bold plunge into Russia by John Browne of BP PLC may make some investors nervous, but the risk seems worth taking. If Browne succeeds, there will be several benefits: Western technology and management, sensibly applied, will create what could become a model company. This sort of international-Russian hybrid may prove a useful vehicle for opening up Russia's vast energy resources faster and more efficiently to the rest of the world. BP will also push to clean up the polluted environment around Russia's oil fields. Browne's deal has already improved the image of Russia as a place to invest. Whereas international oil companies were reluctant to entangle themselves in deals with Russian majors, at least three are now said to be jockeying to wrap up their own arrangements.

The Russians deserve plenty of credit, too. Mikhail Fridman and the other owners of TNK, the company BP has hooked up with, pumped hundreds of millions of dollars into the company over the past few years, modernizing operations and cleaning up its books. And at Russia's largest oil giant, YukosSibneft, Mikhail B. Khodorkovsky has taken similar steps. Now, YukosSibneft is talking to Exxon Mobil Corp. and ChevronTexaco Corp. about possible deals.

All of this activity adds up to a vote of confidence in Russia's President Vladimir V. Putin. Both the Kremlin leader and some of the superrich oligarchs, who dominate the economy, seem to think that, when it comes to big foreign investors, playing by transparent, internationally accepted rules is in Russia's best interests. More investment, such as BP's, will encourage this healthy trend.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE