It’s almost a year to the day since BP and the oligarchs at Alfa-Access-Renova (AAR) agreed to bury the hatchet and “intensify their efforts” to ensure the “continued success” of their TNK-BP joint venture in Russia. Few believed then the pair could sustain the appearance of harmony for long: the bitterness caused by BP’s (doomed) attempt to agree a separate deal with Rosneft to explore the Arctic ran too deep. Even fewer will believe in a happy ending after the latest development – the resignation of Mikhail Fridman, one of the four tycoons, as chief executive of TNK-BP.
BP is whistling cheerfully that Fridman’s role in the post has “largely been ceremonial” but its own chief executive, Bob Dudley, carries enough scars from past dealings in Russia to be wary. The natural interpretation of Fridman’s resignation is that AAR wants something, which is why the air is thick with talk of a “breakdown in governance” at TNK-BP and the arrival of “the endgame” for the relationship. The question is what AAR wants.
It’s probably not a desire for BP to repeat last year’s offer to buy AAR’s holding for $36bn (£22.95bn). It seems more likely that the oligarchs would wish to pitch for all or part of BP’s 50% shareholding. But BP certainly isn’t going to agree to be a minority investor – that would be inviting more trouble. And Dudley knows he would lose his job if he agreed to sell at less than a soaraway price, which AAR seems very unlikely to offer.
So prepare for the endgame, if that’s what it is, to be messy. One immediate battleground is TNK-BP’s dividend. It disappeared last quarter because after the resignation of two independent board members last December there aren’t enough directors to sanction a payout. A few quarters of delay can be tolerated by BP. But the oligarchs’ calculation may be that a dividend-gusher, which is what TNK-BP is meant to be, becomes gradually less valuable for a UK oil giant if the cash doesn’t arrive reliably.
Fridman may also have noticed the decline in BP’s share price, which has lost touch with 500p since February and on Monday slipped below 400p. That’s remarkable when you remember that the post-Macondo low was only 320p. From the point of view of a strategically minded oligarch, it’s the perfect moment to create fresh worries for BP shareholders. It’s still May, but Dudley should prepare for a long Russian winter.
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