BP in Russia
Dancing with bears
BP's Russian venture is already proving trickier than expected
TONY HAYWARD, BP's ex-boss, once moaned that he wanted his life back.
That was after an oil spill in the Gulf of Mexico last year, which the British oil giant expects will end up costing it more than $40 billion.
BP, too, is struggling to get its old life back, even after apologising, helping with the clean-up, dumping Mr Hayward and taking a huge write-off.
On February 1st it announced its final, awful, results for 2010: a loss of $4.9 billion.
That was BP's first loss since 1992, but the company fondly hopes that it will now have an opportunity to move on.
It would like to direct the world's attention to its efforts to improve safety, its plan to start paying dividends once again this year and its ideas for the future.
Alas, some of those plans are already hitting obstacles.
Two weeks ago BP announced a new partnership with Rosneft, Russia's state-controlled oil giant, that will see the companies exploring a large and promising part of Russia's Arctic region for oil.
The deal gives BP access to Russian reserves which are normally kept out of foreign reach.
In return Rosneft will get 5% of BP's shares, making it one of the largest shareholders.
It will also share BP's expertise and technology.
The deal sparked a furious row between BP and its partners in TNK-BP, a Russian oil company run as a joint venture between BP and a few Russian oligarchs.
On the same day that BP's results were announced, a judge in London granted a request by Alfa-Access-Renova, the vehicle through which Russian partners hold their stake in TNK-BP, that the Rosneft deal be put on ice until at least February 25th.
AAR argues that TNK-BP is meant to enjoy an exclusive right to develop any further deals in Russia to which BP might be a party.
It complains that BP has stiffed it.
BP is acting more Russian than a Russian firm,” says one of AAR's largest shareholders. AAR has also moved to block a dividend from TNK-BP that would have yielded BP $900m.
At a press conference Bob Dudley, BP's new boss, said that it had been impossible for BP to talk to AAR in advance of the Rosneft deal because of the market sensitivity of the share swap involved, and that BP and its partners would be headed for arbitration on the matter regardless of the court verdict.
He says he expects to come to a settlement quite easily, and that one of BP's strengths is its long history of involvement with Russia, which contributes about 10% of BP's profits.
At least some of this history, however, consists of misjudging Russian politics and quarrelling with its partners.
When BP formed its joint venture with TNK in 2003, oligarchs seemed the partners of choice for getting things done in Russia.
But in 2008, having judged that the ultimate power in Russia lay with state energy companies, BP went behind the backs of its private Russian partners to negotiate a deal with Gazprom, the state-controlled gas behemoth.
This did not go down well.
BP underestimated the power of Mikhail Fridman, one of its oligarch partners.
A self-made entrepreneur, Mr Fridman got rich in the 1990s and then consolidated his business under Vladimir Putin while remaining his own man—a trick few have managed.
BP's attempt to outplay Russian oligarchs at their own game of power politics failed.
Mr Fridman pulled strings, Gazprom disengaged and Mr Dudley, then the chief executive of TNK-BP, had to flee Russia.
Purported diplomatic cables published by WikiLeaks suggest that Igor Sechin, the deputy prime minister and chairman of Rosneft, BP's new partner, was co-operating with Alfa Mr Fridman's firm and played a part in Mr Dudley's ouster.
Of oil and oligarchs
Now BP is in bed with Rosneft and has shaken hands with Mr Sechin, who is widely seen as the architect of the attack on Yukos, an oil firm that was dismantled with scant regard to the law in 2004.
Yukos's main shareholder, Mikhail Khodorkovsky, is now in jail.
He was ostentatiously given a second prison sentence just as the BP-Rosneft deal was announced.
BP may become embroiled in the legal battle over Yukos's assets, which were swallowed by Rosneft.
But first the British firm faces a fight with Mr Fridman.
If BP assumed that its partnership with Rosneft meant that Mr Fridman would not dare to protest, and that Mr Sechin would always take BP's side, it may have miscalculated.
The legal challenge from AAR is said to come with the full knowledge and approval of the Kremlin.
BP has a very simplistic view of the power structure in Russia,” says Mr Fridman.
AAR does not have any interest in destroying Rosneft's $16 billion deal with BP.
But equally Mr Sechin is unlikely to stand in Mr Fridman's way when he demands that BP compensate AAR handsomely.
Rather than wanting to chase Mr Dudley away again, the Kremlin and AAR are keen to draw BP deeper into Russian business and gain more influence over it.
Rosneft wants to transform itself into a respectable global oil firm, using its relationship with BP as a stepping-stone.
BP must surely have its qualms about this; but all the parties' interests are at least aligned on one thing.
They want those Arctic oilfields to make money.
As Mr Dudley affirmed this week, BP's long-term strategy is to keep searching for oil, which is more lucrative than gas.
And with more and more of the world's oil being produced by state-owned oil firms, private ones need to go to greater extremes, both technologically and politically, to stay in the game.