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Any Other Business

Martin Vander Weyer

Wednesday, 13th August 2008

Does Medvedev really believe in the rule of law? The fate of TNK-BP is the test

Is President Dmitri Medvedev of Russia — who looks and sounds like a liberal-leaning modern technocrat — really his own man, or is he merely the stooge of his predecessor, the sinister, warmongering Vladimir Putin? The mad situation engulfing BP’s Russian joint venture, TNK-BP, is surely the test of this question. Its BP-appointed chief executive, Robert Dudley, has met such hostility from the gang of oligarchs who are BP’s partners in the company that he is now trying to run it by email from a secret address somewhere in eastern Europe. The oligarchs, led by the combative multibillionaire Mikhail Fridman, claim BP has managed TNK-BP (which accounts for a quarter of total BP oil production) more like a subsidiary than an independent venture, refusing to let it pursue opportunities where it might cross other BP interests. In consequence, they say, TNK-BP has underperformed Russian rivals such as Lukoil.

They may have a genuine case, or they may just be trying to run BP out of town in the lawless Russian cowboy-capitalist style usually associated with the Yeltsin era. But what is outrageous is the way in which various arms of the Russian state, including the visa authorities, have been deployed to make life as uncomfortable as possible for BP’s expatriate managers, to the extent that BP is now close to losing any effective control of its massive investment. The Kremlin has done nothing to indicate disapproval of all this — even though Putin gave his public blessing to BP’s participation in the original venture in 2003, and neither Fridman nor his fellow investors, Viktor Vekselberg and Leonard Blavatnik, are known as Kremlin favourites. Frankly, no one really knows what’s going on, but one theory is that Putin wants control of TNK-BP to pass to Gazprom, the state-owned conglomerate which is his weapon in international energy politics — and is not bothered whether that is achieved by bullying BP out of Russia or by forcing the oligarchs to part with their own stakes, or both; the oligarchs, naturally, prefer the first of those scenarios. Either way, the Russian legal system would be ruthlessly deployed to serve Putin’s objectives.

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Captain Coma

August 14th, 2008 9:32pm

"‘Helmsley must have one of these,’ I shouted above the din — but then I thought of all the obstacles of health’n’safety, food hygiene, public disorder and liability insurance, not to mention weather, that would instantly be erected against such a proposal anywhere in England."

My goodness, you've got that absolutely spot on. The weather we can't help, but everything else ...

Alfred T Mahan

August 16th, 2008 4:57pm

I'm dumbfounded that people ever thought that the rule of law existed in Russia. I used to travel there extensively on business in the Brezhnev era, and the only lawyers available anywhere to look after the interests of foreigners were Iniurcollegia in Moscow - about the size of a small bar set in London. They were of poor quality and in my experience never managed to overturn by law a bureaucratic decision. The whole setup was a figleaf to give the impression of the rule of law. You cannot expect a society to generate institutions based on the legal separation of powers overnight when it has been entirely alien throughout its history (and this includes Tsarist as well as Communist Russia), and so it has proved. Russia thirty years ago was, and remains, a kleptocracy in which the powerful please themselves and bugger the rest, and this attitude inevitably carries through into foreign affairs. There's no evidence that this will change any time soon, despite wishful thinking. The only way to deal with Russia is containment, and forward thinking to avoid falling into dependency on them - which Europe, and particularly Britain, is perilously close to doing because of our asinine energy policy over the past decade.

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