Anyone who's picked up the business section lately knows about TNK-BP-if they didn't already. The company, a joint venture between BP and Russia's Alfa, Access/Renova Group (AAR), is currently locked in an internal dispute over management control. AAR wants to replace TNK-BP's CEO, Robert Dudley, alleging he's favoring BP's interests and not doing enough to increase the company's value. BP calls those charges false. Yet amidst all these accusations, one thing seems clear: the outcome of this mess may have serious implications for the already-strained relationship between Moscow and the West.
This feud and its larger context was the subject of conversation at a Nixon Center event on Thursday, entitled "TNK-BP: What is Going On?" Lord George Robertson, vice chairman of TNK-BP, was on hand to present his perspective. Robertson is an independent director of the joint venture; he was appointed by BP. Nixon Center President Dimitri K. Simes served as moderator.
Simes kicked things off by highlighting the importance of the situation: "it does not just affect a particular company . . . but our view of the investment climate in Russia." At a time when "most of us want to see more energy production in Russia," he continued, the situation has "profound implications" both for energy security and wider Washington-Moscow ties, by discouraging U.S. companies that could otherwise be an important constituency for U.S. engagement with Russia.
Lord Robertson, a former NATO secretary-general, then took the microphone. He argued that the charges against Dudley-that he's a poor manager and loyal only to BP-were unfounded. Revenues reached $28.3 billion for the first half of 2008, he said, in no small measure because of the embattled CEO: TNK-BP is "not a company that is struggling"; no one has "any right to criticize [its] performance." Instead, Robertson charged, the four Russian shareholders who control AAR have an "obsession" with gaining control of the entire venture and merely want to "cash in" for the short term.
Robertson also dismissed the other main criticisms of the four billionaires: that TNK-BP hasn't invested enough abroad and has too many foreign workers. On the first count, he said, the original joint-venture agreement limited TNK-BP's activities to Russia. Despite this, TNK-BP has considered nine projects outside the country and recently signed a deal to develop energy resources in Venezuela. As for the second, Robertson stated that only about 140 of the company's sixty-seven thousand employees aren't Russian. At a time when "trained personnel" in the oil industry are in short supply, he maintained these expatriate workers have been critical to the company.
All in all, Robertson said, the effort to remove Dudley was "inimical to Russian national interests" and damaging to TNK-BP's bottom line. He called it an "outrage" that Dudley has been denied a work visa by Russian authorities, who say the dispute prevents them from granting one, and expressed concern that the company's performance could suffer because Dudley will be forced to manage it from outside Russia.
So is the campaign by AAR part of a larger effort by the Russian government to take over TNK-BP? Not according to Lord Robertson: "None of the meetings I've had," he said in the question-and-answer session, suggest that "senior levels of government are involved." He stated that there was no "battle between the Russian government and BP." Yet Robertson implied that bureaucratic forces, under the sway of the Russian shareholders, could be playing a role, especially as Russian elites are distracted by the Putin-Medvedev transition. Several of the meeting's participants were not so sure. They raised the possibility that larger forces other than the Russian partners were likely behind the conflict. The causes of this might range from the Russian government's official stated desire to have greater control over its energy industry to the serious deterioration in both U.S.-Russian and British-Russian relations. Amity between the governments was considered an essential precondition for a successful business partnership when the original deal between AAR and BP was made in 2003.
Where does that leave things? No one can be too sure. While Robertson took pains to point out that he was a "great supporter of Russia" convinced that "good relations" with Moscow were critical, he made clear that BP "intend[s] to defend our interests to the maximum extent." And since TNK-BP is a registered company in the British Virgin Islands, that leaves the possibility of settling this through international arbitration. George W. Bush, Gordon Brown and Angela Merkel have all raised the issue with Russian leaders. Hopefully, BP and its Russian partners will resolve the imbroglio-and prevent the West's relations with Russia from suffering any more.
Andrew E. Title is an apprentice editor at The National Interest.