Foreign direct investments contract 39 per cent – no wonder BP deal was pushed through

As reported by UNCTAD (United Nations Conference on Trade and Development) on 23 October 2012, foreign direct investments into Russia contracted by 39 per cent in the first half of 2012 to USD 16 billion compared to the same period in 2011.

According to the audit and advisory firm KPMG, globally M&A transactions are down to their lowest level since 2005.

So in the circumstances, the abrupt volte-face of the Kremlin and Russian government to back BP’s exit from TNK-BP and deal with state-controlled oil & gas behemoth Rosneft makes more sense. The Kremlin is desperate for some good news about investment, desperate for someone to praise its attitude to foreign investors. That was not going to happen as long as it allowed BP’s partner in TNK-BP, the AAR Consortium, to constantly undermine one of Russia’s biggest foreign investors and company that has expertise needed by Rosneft.

So now BP can be the figurehead for a campaign to promote investments in Russia and can also be expected to toe the line with Rosneft, as it has a minority interest and needs to build up its reserves.

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