BP heads for Russian exit

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I said on Tuesday that BP was playing a game of chicken with the Russian billionaires who co-own TNK-BP. What is slightly unclear this morning is whether BP has blinked or put its put foot down harder on the accelerator.

BP has had years of difficult and fractious relations with the troika of billionaires, who work through the AAR consortium. Following the almost total collapse of normal working relations with them, BP's board has decided to try and sell its 50% stake in TNK-BP, following receipt of what it calls "unsolicited indications of interest".

I understand that one of these approaches is from an unnamed Russian state business, which might offer cash and shares for the TNK-BP stake. The Russian billionaires, led by Mikhail Fridman, have also suggested to BP they would perhaps be prepared to buy the British company's stake.

Slightly confusingly, BP also sees the billionaires as potential sellers to BP of all or part of their shares in TNK-BP, although not on terms that BP's board regard as acceptable.

TNK-BP is thought to be worth around $50bn. Strikingly that is less than the $64bn valuation put on it last year by BP - which may cause concern to some BP investors.

But a year ago, the oil price was 25% higher, BP-TNK contained more cash, and there was the possibility of more value being extracted from it via a possible related deal with another Russian energy giant, Rosneft (at that time BP would have bought the billionaires' stake and then sold it to Rosneft).

If BP now succeed in selling its TNK-BP shares - and we probably won't know that til the last three months of the year - it would probably receive $25bn, including a stake in another Russian energy business.

But that is an if - given that BP's Russian billionaire partners have a history of throwing large and disruptive spanners into BP's works.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 4.

    24.Sir Algernon Frayed Cuffs
    29th May
    BP did do a good job in Azerbaijan, maybe they thought the Russian bear was a similar animal, If they have any sense they would cut and run. I suppose a poison parasol would be the Russians weapon of choice in this weather ?

    I posted this the other day, I got minus two from my compatriots, I hope it was for the weak joke at the end and not the advice.

  • rate this

    Comment number 3.

    Well lets wait and see.
    Me sitting on the fence spitting out random opinions won't make a scrap of difference.

  • rate this

    Comment number 2.

    Is there a discernible strategy lurking in this move. If there is it is well concealed. Russia is never business as usual largely because of the insane sell off by Yeltsin of Russian state corporations in a desperate attempt to turn capitalist over night. Some one should desecrate his tomb.

  • rate this

    Comment number 1.

    A warning, if there hadn't been plenty already, that investing in Russia is a risky business. There is no distinction between the State, the Law, the so-called "elite" and organised crime. They're pretty indistinguishable!

    George Soros put it well. "If I were a young man with $20K I would invest it in Russia. If I were an older billionaire...well I would still invest $20K in Russia!"

    Spot on!


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