Russian oligarch Mikhail Fridman rounds on 'irrational' North Sea protection

The L1 Energy investment group completed its €5.1bn (£3.7bn) takeover of RWE’s Dea business yesterday

Fridman's LetterOne is seeking a judicial review against Government sanctions (Getty Images)

The Russian billionaire Mikhail Fridman and Lord Browne, the head of his new oil and gas investment group, have rounded on the UK Government, dismissing its attempt to block a major deal as “irrational” and threatening to challenge the move in court and to seek compensation.

The L1 Energy investment group completed its €5.1bn (£3.7bn) takeover of RWE’s Dea business – which includes North Sea assets – yesterday, as the former BP boss Lord Browne was appointed L1’s chairman.

But, while the deal went through, a cloud was hanging over the transaction last night with the Government threatening to force Mr Fridman to sell Dea’s North Sea assets on concerns about the effect sanctions on Russia may have on the UK assets.

Mr Fridman’s group – L1 parent, LetterOne – said it would seek a judicial review and possibly compensation if the UK Government follows through on its threat.

The Government said at the weekend it was concerned that the risk of further sanctions on Russia may affect Mr Fridman or LetterOne, his $29bn investment fund. This could, in turn, force the closure of North Sea operations, creating safety and environmental risks and loss of revenue, the Government argued.

This is the first time a Western government has publicly intervened in a proposed deal with a Russian company over fears about sanctions. It is a particular blow to Mr Fridman, who is seeking to diversify his investment portfolio outside the company with the appointment of Lord Browne to oversee his drive into oil and gas.

He has reacted strongly to the Government’s stance. In a letter to the Energy Secretary, Ed Davey, LetterOne’s chief executive Jonathan Muir said the Government’s objections about the deal with RWE were “not rational” and that he was “deeply disappointed and concerned” about them.

He was scathing about the way Mr Davey’s Department for Energy and Climate Change (DECC) made its intervention over the weekend – just two days before the deal was due to close yesterday, leaving LetterOne with no time to respond to his concerns. “These actions to advertise DECC’s decision seem designed to put on notice third parties, potentially creating uncertainty that DECC alleges it is guarding against through its letter and the position taken in it,” Mr Muir wrote in his letter to Mr Davey yesterday.

“You should therefore be clear that, in the event that any notice requiring the further sale of RWE Dea is issued, we intend to seek judicial review of DECC’s decision and fully reserve all of our rights both in that regard and generally,” he said.

“That reservation includes our right to seek compensation for any damage caused to the value of our investment in RWE Dea by DECC’s decision, including bringing a claim under the Energy Charter Treaty,” Mr Muir added.

LetterOne takes issue with Mr Davey’s concern that the risk to Dea’s UK assets is similar to that involving the North Sea’s Rhum field, controlled by BP and the National Iranian Oil Company. Production at Rhum was halted in 2010 because of sanctions and did not restart until October last year.

In contrast to that situation, this deal would have an “insulating structure”, the group argued.

RWE and LetterOne have proposed that Dea operates the UK business but is monitored by a separate enti-ty registered in the Netherlands. This would assume control of the unit if sanctions were impose on L1 or Mr Fridman.