Thursday, August 14, 2008

BP's Russian Boss Goes Into Hiding

This article was published last month before the conflict began. Russia bombed the BP pipeline during it's invasion.

TNK-BP boss Bob Dudley has gone into hiding this weekend as the battle between BP and its Russian partners threatens to turn into a diplomatic incident.

Dudley, who left Russia last week, has set up a secret European command centre from which he will attempt to keep control over TNK-BP, a lucrative joint-venture between BP and Russian investors.

Dudley has gone to extraordinary lengths to conceal his whereabouts, including extensive security measures to ensure his phone calls and e-mails are untraceable. His location is known only to a handful of BP executives and he has been joined by a small, hand-picked support team.

American and European governments have been drawn into the row. Gordon Brown, US Treasury secretary Hank Paulson and EU trade commissioner Peter Mandelson are understood to have made representations to Vladimir Putin, Russia’s prime minister, to resolve the issue. BP is America’s biggest oil producer and about a third of the company is owned by Americans.

Dudley’s departure comes against a backdrop of soured relations between Britain and Russia over the Alexander Litvinenko poisoning, and growing American anxiety over Russia’s policy of taking control of national energy assets at the expense of western investors.

Dudley fled to escape a campaign of “extreme harassment” by the authorities. BP chairman Peter Sutherland said: “He is not in a BP office or in our headquarters in London, as has been suggested. I’m not going to say where he is but I don’t think he is under any physical threat.”

TNK-BP is Russia’s third-largest oil and gas group. It accounts for a quarter of BP production and a fifth of its reserves.

BP sought to stamp out speculation that now Dudley is out of the country it is only a matter of time before it loses control of the Russian company. Chief executive Tony Hayward said: “We intend to hold our ground and are not going to be intimidated.” BP acknowledged, however, that Dudley’s reign-in-exile will only work as a temporary solution, perhaps for three to four months.

BP has hired the City law firm Linklaters and is preparing to begin arbitration proceedings in Sweden over alleged violations of TNK-BP’s legal framework by AAR, the consortium of Russian billionaires — Mikhail Fridman, Viktor Vekselberg, Leonard Blavatnik and German Khan — who own the other half of TNK-BP.

The Foreign Office said the conflict was “bad news” for Russia, where new president Dmitry Medvedev has made imposing greater “rule of law” one of his top priorities.

Paulson is understood to have brought up the matter with Medvedev when he became the first senior American official to visit the country’s new president this month.

Mark Pritchard, chairman of the all-party British-Russian Parliamentary Group, will also challenge the Kremlin on its role in the dispute on a forthcoming trip to Moscow with MPs. He said: “This is yet another example of the Kremlin interfering through the back door with foreign investment in Russia. In the long term, this will be damaging for the investment climate in Russia.”

The extraordinary lengths to which Dudley has gone to maintain control have come after months of what BP deemed “an orchestrated campaign of harassment” by Russian authorities. The company alleges that this has been carried out at the behest of AAR. TNK-BP offices have been raided repeatedly. Tax, labour and environmental authorities have launched investigations. In recent weeks, Dudley and other managers had begun switching mobile phones several times a week for fear that they were being bugged.

AAR denies “categorically” that the clashes with the Russian authorities are in any way related to its increasingly aggressive campaign for change at TNK-BP. The four billionaires want to oust Dudley and push through other structural and strategy changes at the group.

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