Fresh pressure on BP as its chief in Russia faces inquiry

TNK-BP chief executive to be interrogated by Russian investigators over 'corporate tax evasion'

At BP's headquarters in St James's Square, there is a distinct sense that, after months of scattered but sustained disruptions to its vital Russian business, the end game is approaching.

Next Monday, Robert Dudley, the BP-appointed chief executive of TNK-BP, will face interrogation by Russian investigators after receiving a summons last week. The questioning, ostensibly over possible corporate tax evasion at TNK-BP's predecessor company between 2001 and 2003 – Mr Dudley took over in late August 2003 – and labour violations, is the latest turn amid a bitter and escalating struggle for control of Russia's third largest oil producer.

TNK-BP put a brave face on the targeting of its American-born executive. In a statement, the company said it regarded the development as "a routine procedural matter which is not connected with current shareholders discussions".

Few believe this to be the case. Last week, the trio of billionaire oligarchs who share ownership of the business with BP called for Mr Dudley's removal, arguing that he was managing the business in the interests of the UK giant, to their detriment.

BP flatly turned down their demand. The oligarchs – Viktor Vekselberg, Mikhail Fridman and Len Blavatnik – are infuriated with Mr Dudley since he rejected an earlier proposal they put forward outlining an aggressive international expansion plan.

Instead, he wants to pour more money into increasing its domestic output. A long-scheduled board meeting was cancelled last week. Jean-Luc Vermeulen, an independent director, resigned over the impasse.

The deteriorating situation has, so far, not deterred BP. Its chief executive, Tony Hayward, said yesterday that he remained committed to the company and to Russia.

He was in Moscow to deliver a speech at Rosneft's annual general meeting, where he surely had a word or two with Igor Sechin, Russia's deputy prime minister and the chairman of Rosneft.

TNK-BP earned $5.3bn (£2.7bn) on $39bn in turnover last year, and accounts for a quarter of BP's global production. It is the only oil and gas group in Russia in which the Kremlin has no economic interest. Since the jailing of the former Yukos head, Mikhail Khodorkovsky, in 2003, the Russian state has systematically taken over and or reacquired major interests in its biggest natural resource groups. Speculation that TNK-BP would get the same treatment has been rife almost since the day it was created in 2003. Against the odds, it has so far retained its independence.

Since March, BP's Mos-cow offices have been raided, a former TNK-BP employee was arrested for alleged industrial espionage, and 148 top executives and technical staff – all seconded from BP – have been prohibited from working by a Siberian court after a lawsuit was filed by a tiny company run by men who used to work for Mr Fridman's Alfa Group.

Most observers find it hard to view the drumbeat of bad news as anything other than a concerted campaign by AAR, as the oligarch's consortium is known, to wrest control of the company. Through that prism, the shenanigans are seen simply as a form of negotiations, Russian-style.

Most expect the oligarchs to be the ones forced to sell, either to Gazprom or Rosneft. "Ahead of selling out, they want to be intimately involved, if not running the game, in any deal between BP and Gazprom. They don't want to be the patsies that are presented something as a fait accompli," a person close to the company said.

The clock is ticking. German Khan, an executive director at TNK-BP, who also sits on the board of Mr Fridman's Alfa Bank, requested government approval for work permits for fewer than half of the company's current foreign staff – the 148 BP secondees already barred from working. If it is not resolved before their current permits expire in July, they could be turned out permanently, potentially crippling the group and vastly reducing BP's influence at the company.

The Kremlin has an interest in letting BP keep its stake. If it were forced out or reduced to a minority shareholder, foreign investor sentiment – improved markedly since the vodka-soaked regime of Boris Yeltsin – would surely sour.

How it is resolved will also be used as a reference point for the business environment under Dmitry Medvedev, the country's newly minted president.

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