Outlook When BP and Rosneft abandoned their attempt a few weeks back to agree a tie-up that would see the two companies swap their shares and explore the Arctic Ocean together, the message was that talks would nonetheless continue. The sticking point, of course, is the position of TNK-BP, BP's existing Russian venture, because AAR, its 50/50 partner, is deeply unhappy about the Rosneft deal. BP's line on that problem was that an accommodation could still be reached with AAR, particularly without the pressure of a deadline hanging over everyone's heads.
Well, maybe so – but the mood music so far does not sound any more harmonious. If anything, in fact, relations between BP and AAR appear to have deteriorated further. The British company has now taken to dropping great big hints that in the absence of an agreement, it will sell Rosneft half its stake in TNK-BP, as well ascontrol of the voting power of the whole 50 per cent block.
That looks like a pretty bare-faced attempt to bounce AAR into signing up to a solution to the impasse – presumably the one on which agreement was almost reached last time, under which the billionaires who run the company would have sold up. Certainly, the prospect of negotiating with Rosneft over every last TNK-BP decision is unappealing to AAR to say the least.
These are dangerous tactics on the part of BP. It is not clear whether it really intends to sell to Rosneft, or whether it simply wants to worry AAR. But either way, it is worth remembering that what really stymied a deal last month was the lack of trust between all the parties concerned. Their advisers ran out of time to come up with a legal formulation that would have tied everyone to their word once an AAR sale was agreed – that such a formulation was deemed so essential tells you everything you need to know about the poisonous relations between these companies.
It is difficult to see how BP's latest threat to AAR might improve matters. And the problem for the British company is that it has more to lose than the Russians. Every day that goes by without a peace deal is another day for rivals to cosy up to Rosneft. Shell, in particular, has been sniffing around an almost identical Arctic venture and can do a deal with Rosneft that comes with none of the AAR baggage. The word is that the only thing stopping such a deal is Shell's reluctance to go for the type of share swap BP has agreed.
Moreover, BP isn't just at risk of missing out on the Arctic. There is also the possibility of a damaging legal case with Rosneft, should the Russian company decide it wants to play hardball. Another legal wrangle with AAR is likely too if BP makes good on its threat to sell up to Rosneft.
All in all then, this soap opera looks certain to run on for some time yet. BP's chief executive, Bob Dudley, knows the prize in the end, the right to exploit an Arctic block that is of a similar size to the North Sea, is hugely valuable. But he doesn't seem to be getting any closer to claiming it.