Maybe Robert Dudley likes to be beaten with a stick because it feels so good when it’s over. Or maybe Dudley, CEO of BP, will endure almost any punishment to get to Russia’s share (whatever that is) of the possibly hundreds of billions of barrels of oil in the depths of the Arctic.
It seemed brave or crazy when in January BP and Russian oil giant Rosneft announced a joint project, including a swap of shares, to explore the Arctic. As TOL noted then, Dudley had hightailed it out of that country in 2008 when disagreements with Russian partners in another joint venture, and harassment by government officials, made it virtually impossible for him to stay.
It’s those same Russian partners who have either nipped this new venture in the bud, or simply delayed it, depending on who’s talking. An arbitration court in Stockholm last week upheld an injunction brought by those partners, who along with BP form TNK-BP, against the Rosneft deal, which they say violates their right of first refusal on other BP ventures inside Russia.
Igor Sechin, the chairman of the Rosneft board and Russia’s deputy prime minister, said it’s only a temporary setback, but BP officials were looking for ways to salvage the deal. BP’s directors don’t want the Rosneft deal to be handled by TNK-BP, but if they get their way, they’ll likely have to pay that set of Russian partners some compensation for cutting them out. Meanwhile, Sechin has made it clear that someone is going to have to pay for the costs of what he calls delays but what could really be cancellation.
This time, though, BP is allied with a state oil company, which is almost indistinguishable from being allied with the Kremlin. So this could get interesting. In an 11 March statement, during the court proceedings but before last week’s decision, Rosneft posted a statement on its website that contains some chilling language:
TNK-BP was never considered as a possible participant in the alliance due to its lack of the relevant competence, and TNK-BP never made any proposals to Rosneft expressing its interest in working on the shelf.
Any activities aimed at disrupting the deal that cause damage to Rosneft will be closely examined.
Based on such examination, Rosneft will undertake all measures to defend the rights of its shareholders, with all the resulting consequences.
Some commentators said Dudley underestimated the complexities or pitfalls of working in Russia, but that hardly seems likely. Maybe this time, the guy holding the big stick is actually a friend of his.