The Russian game

1 August 2012 By Kevin Allison

BP’s partners are playing hardball over their Russian joint venture. But a nixed dividend and legal noise are mostly distractions. TNK-BP’s core business shouldn’t be affected, and its valuation has become clearer. With Rosneft circling, BP should have a strong position.

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BP’s Russian joint venture partners have voted against paying a special $1 billion dividend from TNK-BP, rebuffing a request by the UK oil major. The move came as the two groups were engaged in talks about a sale of BP’s stake in TNK-BP, Russia’s third-biggest oil producer.
BP and Alfa Access-Renova, a consortium of four Russian billionaires, each own 50 percent of TNK-BP International. TNK-BP International, in turn, owns 95 percent of TNK-BP Holding, the publicly listed arm of the Russian producer, which accounts for most of the joint venture’s value.
Strained relations between BP and AAR have left TNK-BP International unable to make regular dividend payments or take most big corporate decisions. However, dividend payments from TNK-BP Holding to TNK-BP International and minority shareholders have not been affected by the dispute.
Relations between the joint venture partners soured in the wake of BP’s failed share swap and arctic exploration deal with Russian state producer Rosneft. The deal fell apart under AAR pressure last year.
On July 27, a Siberian court awarded $3.1 billion in damages against BP, part of a lawsuit brought by minority shareholders in TNK-BP Holding, who alleged the group suffered damage as a result of the failed Rosneft deal. BP called the legal case a “corporate attack” and said it would appeal the ruling.
Rosneft and BP last week announced they would also begin negotiations over a potential purchase of BP’s stake in TNK-BP.

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