David Prosser: BP in Russia: oil barons succeed in blocking $16bn tie-up with Rosneft


Outlook The twists and turns of the BP story should have stopped surprising us long ago, so numerous and remarkable have they been, but there was an obvious irony in yesterday's successful application by a set of Russian oil barons to delay BP's deal with their biggest domestic rival.

The ruling in the High Court in London that effectively freezes BP's $16bn (£9.9bn) arrangement with Rosneft was made following an application from AAR, the vehicle through which a trio of Russianbillionaires hold their half of BP's TNK-BP, its existing joint venture in the country.

A few hours previously, Wikileaks had released diplomatic cables shedding new light on the row BP had over TNK-BP in Russia two years ago, when Bob Dudley, who ran that operation and is now chief executive of the whole of BP, was effectively thrown out of the country. The cables provide a colourful account of a world in which one of AAR's owners carried a gun and talked about his love of The Godfather films.

The implication was that BP believed it was dealing with a situation where it could not be assumed that the rule of law would always prevail. Yesterday, AAR used the rule of law in BP's home country to block the Rosneft deal.

Despite Mr Dudley's claim that the ruling was not a big blow to BP, because the company had already agreed to arbitration talks in Sweden with AAR, the court's decision must have been a disappointment. At the least, it must strengthen the hand of AAR, which appears to have a point in complaining BP had promised that TNK-BP would get first refusal on any further ventures in Russia that either side wished to pursue.

BP's tie-up with Rosneft is a smart one in the context of its difficult relationships in the US, where the fall-out from the Deepwater Horizon disaster continues. Yet the deal carries plenty of its own difficulties. The potential for problems with Rosneft itself was obvious, but the argument with AAR had not been foreseen. Keeping its partners onside may yet require BP to write them a very sizeable cheque. It certainly cannot afford to return to the disputes of 2008 – for all the long-term value the Rosneft arrangement may deliver, TNK-BP is the British company's bird-in-the-hand.

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