TNK-BP partners solve the issue by both selling out

According to an article in the Guardian on 17 October 2012 entitled Rosneft boss flies to London to seal buyout of TNK-BP, the Russian oligarchs in TNK-BP, Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik, represented in the venture by the AAR Consortium, have decided to cash their chips for an estimated USD 28 billion (approximately GBP 17 billion), selling to state-controlled company Rosneft.

Former Deputy Prime Minister and current Rosneft CEO Igor Sechin is apparently flying to London to close the deal. Meanwhile BP will exchange its 50 per cent interest in TNK-BP for an interest in Rosneft.

It may be too soon for the oligarchs to celebrate, as the deal still requires state approval. However, the deal would restrict even further any influence held by BP on the Russian oil market and also consolidate state control of the oil & gas sector, which is the key source of revenues for the federal budget. The deal may also put even more pressure on the remaining private players on the market such as LUKOIL.

The Russian oligarchs are probably kicking themselves – last year they turned down an offer of USD 32 billion for their share from BP and Rosneft. Pushed into a corner, they had no choice: they were loathe to continue in TNK-BP as a partner to Rosneft instead of BP, as they would have been under the state’s cudgel.

BP will be relieved to say goodbye after the excruciating legal difficulties that it had encountered as a partner in TNK-BP with the AAR Consortium. It remains unclear whether the deal will bring to an end the court cases initiated by AAR against BP over its previous planned decision to join forces with Rosneft.

At the same time, if the deal does proceed, it will pinpoint the shortsightedness of AAR’s shareholders: surely it would have made more sense to reach a settlement with BP a long time ago when the company was keen to hook up to Rosneft, rather than waste time and money on litigation with a foreign partner?

It also makes one wonder if the oligarchs had their hand forced. Could it be that they were keen to put behind them the disclosure of alleged corruption at TNK-BP, threatened by a former employee Igor Lazurenko? It was announced only the other day that TNK-BP had lost a gagging order in the High Court of London to prevent the former head of logistics from publishing documents outlining wrongdoing by TNK-BP senior management.

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