Russian billionaire Mikhail Fridman has resigned as chief executive of TNK-BP, the UK’s oil giant’s 50-50 Russian joint venture with Alfa Access Renova (AAR). AAR is a consortium through which Fridman and other oligarchs hold their stake. Sources close to AAR said Fridman had quit because of a “breakdown in governance”. AAR had “lost faith in BP as a partner”.
What the commentators said
There are two standout features of BP’s nine-year Russian venture, noted Robert Peston on bbc.co.uk. It has generated billions for BP as it accounts for almost a fifth of group profits. “And it has been a total nightmare to manage…[thanks to] appalling relations” between BP and the oligarchs.
“The natural interpretation of Fridman’s resignation is that AAR wants something,” said Nils Pratley in The Guardian. But what? The oligarchs may be hoping to end corporate governance problems by buying part or all of BP’s 50% stake. But BP wouldn’t want to be a minority investor as this would leave it even more exposed to AAR’s strong-arm tactics. Moreover, chief executive Bob Dudley would be under pressure to achieve a “soaraway price”, which AAR looks unlikely to offer.
Or AAR may be hoping BP will buy them out. But as Peston pointed out, foreign businesses are banned from owning more than 50% of Russian strategic assets so a buyout could jeopardise BP’s relations with the government and ultimately lead to the loss of the venture. As there haven’t been enough directors on the board of TNK-BP to sanction dividend payments recently, both sides are missing out on payouts. Expect the “endgame” of this drama “to be messy”, said Pratley.