AAR Getting the Last Laugh
- By Yulia Latynina
- Jun. 25 2008 00:00
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Two weeks before our vigilant Federal Security Service agents arrested TNK-BP employee Ilya Zaslavsky and charged him with industrial espionage, one of the owners of Alfa Group complained to then-President Vladimir Putin that "the foreigners are getting in our way."
When I wrote this after Zaslavsky's arrest, even some well-informed businessmen said, "This is impossible. After all, why would Alfa start a conflict with the British? If Alfa did this, it would be persecuted everywhere in every country except Russia."
It is clear that Russian and British shareholders in TNK-BP are now embroiled in a bitter internal feud. As in any conflict like this, each side has its own version of what it considers to be the truth.
It is certainly true that the Russian authorities have acted nastily toward the firm's British partners. In corporate disputes in civilized countries, government authorities do not bring trumped-up charges of spying against foreign businessmen, nor do they try to intimidate the firm's CEO by calling him into the Interior Ministry for five-hour interrogations.
But it is also true that TNK-BP's Russian shareholders, known collectively as AAR, have good reason to be upset with the way the Russian-British business partnership has unfolded. AAR's complaints are not limited to the ones they have voiced in the media -- that they have been sidelined from participating fully in managing the company and that BP has prevented the joint venture from expanding its activities in international markets.
In fact, both of these claims are rather doubtful. After all, BP already paid the AAR consortium $6 billion for the right to have management control of the company. It is a bit strange that AAR accepted this money and the corresponding terms, but it is now crying foul. They should have protested earlier.
As for the allegations that BP has undermined AAR's expansion into global markets, the Russian shareholders have yet to put forward any specific examples of BP misconduct. The only instance of which I am aware concerned some kind of half-baked oil exploration and development license in Iraq. Alfa Group owners wanted to buy the license for TNK-BP, but the British shareholders opposed the deal. In the end, TNK-BP shelled out the funds to complete a due diligence study of the project, and AAR bought the license on their own.
Russian shareholders have indicated that the main grievance is BP's separate negotiations with Gazprom, which could include a deal to buy out the AAR stake in TNK-BP. Gazprom and BP say they are holding talks about the rights to develop the Kovykta gas field and not about TNK-BP's future, but representatives from both companies have said TNK-BP has also been discussed. In principle, BP has no right to enter separate negotiations concerning a buyout or oil and gas deals without AAR's participation, according to the terms of the BP-TNK joint-venture agreement.
When BP first entered Russia in the '90s, it used the powerful Alfa Group to gain a foothold in the country. Now the situation has changed, with state-owned oil companies calling the shots. Shortly after the joint venture's moratorium on the sale of shares by either side expired on Jan. 1, BP started talks with Gazprom on a number of joint projects.
An AAR buyout with Gazprom's participation would create a new, profitable configuration for BP in which the state would effectively force AAR's private shareholders out of the oil and gas business using BP's money. In return, BP would gain the right to represent Gazprom in foreign markets. Put more simply, Gazprom would replace Alfa as BP's new partner.
BP would have beaten AAR to the punch if it had struck a deal with the state to use government resources to trade one Russian partner for another. But AAR shareholders are getting the last laugh by showing that they are more skillful than BP at the quintessential Russian game of "knock your partner's teeth out with the government's help."
Yulia Latynina hosts a political talk show on Ekho Moskvy radio.