New Challenges for BP in Russia
Ever had the feeling someone was out to get you? British energy giant BP (BP) may be experiencing something similar, judging by the spate of misfortunes the company has faced recently in Russia. The latest blow is a lawsuit filed by a little-known Moscow brokerage named Tetlis that has succeeded in preventing BP experts from working at the company's Russian oil subsidiary, TNK-BP (TNBPI.RTS).
Tetlis, which is a minority shareholder in TNK-BP, alleged in its suit that BP specialists were overpaid and asked the court to declare the terms of their employment illegal. In response, a regional court in Tyumen, Siberia, where TNK-BP extracts oil and natural gas, banned the BP workers assigned to advise TNK-BP. The British company rejects the finding. "We believe [the case] has no legal merit and we intend to contest it," BP spokesman Toby Odone told BusinessWeek.
It's an unusual case, to say the least—and typical of the growing intrigue surrounding TNK-BP. For one thing, according to media comments made by TNK-BP Chief Operating Officer Tim Summers, Tetlis filed its suit only one week after buying shares in TNK-BP. And its ownership stake is worth just $40,000—a tiny slice of an enterprise worth tens of billions of dollars.
Tetlis has not responded to media inquiries and didn't answer calls made to the phone numbers listed on its Web site. On that site, Tetlis describes itself as a specialist in hostile takeovers carried out by "quiet guys in specs." According to Reuters, the brokerage also does not have offices at the address listed in its court filing.
Adding to the curiosity, the lawsuit was filed just days after BP had overcome a previous hurdle facing its international employees. At the beginning of this year, Russia's immigration service suspended the visas of 148 BP specialists seconded to TNK-BP, saying that their visa applications had been submitted incorrectly. BP says it recently managed to reinstate all the visas—only to find its staff barred once again by the Tyumen court ruling. The expatriate workers provide expertise in areas such as oil field development and well selection.
Then there's the matter of TNK-BP manager Ilya Zaslavsky, who was arrested for spying in March (BusinessWeek.com, 3/20/08) following police raids on the offices of BP and TNK-BP. Russia's security police accused him of illegally acquiring secrets about Russia's oil reserves.
Intense Speculation About Sale
Among Russian analysts, few believe such things happen entirely by coincidence. For months, Moscow has been abuzz with speculation about what could lie behind TNK-BP's string of troubles. The most popular interpretation—at least until recently—was that the Kremlin was putting pressure on TNK-BP to force the company's Russian shareholders to sell their 50% stake to the government. BP is partnered with a Russian consortium called Alfa Access Renova, headed by three well-known tycoons Mikhail Fridman, Len Blatvanik, and Viktor Vekselberg.
Speculation about a sale has been so intense that Alfa Access Renova even issued a public denial on Apr. 24, after the Russian business daily Vedomosti reported that state energy concern Gazprom (GAZP.RTS) was negotiating to buy the tycoons' stake for $20 billion.
In recent years, the Russian state has renationalized large chunks of the energy sector (BusinessWeek.com, 4/19/07), so it would surprise no one if TNK-BP were next in line. Yet the idea that the pressure on TNK-BP stems solely from the government is too simple for some people's tastes. More recently, talk has focused on the theory that internal feuding among TNK-BP's powerful Russian shareholders may be at the root of the problems.
Private Dispute at the Heart of It?
This could explain why BP itself, and not just the TNK-BP subsidiary, has faced so much pressure. After all, if the aim were to encourage the Russian shareholders to sell their shares, barring BP's expatriate specialists would be a strange way to do it. It's also possible the two threads are linked. With the Russian government rumored to be seeking a majority 51% shareholding in TNK-BP, both BP and the Russian parties would have to reduce their stakes below 50%. It's not hard to imagine how such a situation could lead to tensions among existing shareholders.
The news of the lawsuit and court ruling in Tyumen lends weight to the idea that a private dispute may be at the root of the trouble. According to its Web site, Tetlis' senior managers formerly worked for Alfa Group, one of the major Russian partners in TNK-BP. That has fueled speculation in some quarters that Alfa, which is led by Fridman, may be behind the suit.
Alfa issued a public rebuttal of that notion on May 15, stating the managers of Tetlis "had no relationship whatsoever either with Alfa Group or any affiliated group or company." The release added that Alfa Group's shareholders are "fully satisfied with their relationship with their British partners."
The implication is that the biographies posted on the Tetlis Web site may be fakes. If that's the case, all bets are off about who is behind the mysterious Moscow brokerage and what their motives may be. One way or another, BP's setbacks in Russian increasingly look to be more than just a series of unlucky coincidences.