TNK-BP (A): Russian Oil and Foreign Interests

By Bruce McKern, Lyn Denend
2009 | Case No. IB86A

On February 11, 2003, British Petroleum (BP) and a consortium of Russian investors, called Alfa/Access/Renova (AAR), first announced their intention to create a strategic partnership to jointly hold their oil and gas assets in Russia and Ukraine. The company resulting from this 50/50 partnership would be known as TNK-BP. When the deal closed in late August, TNK-BP became one of the top ten private oil and gas companies in the world. In its first five years, TNK-BP delivered the highest total return among major Russian oil companies, paying over $20 billion in dividends, according to BP. Yet, in 2008, even as TNK-BP was in the midst of what leadership described as its best year ever in terms of results, it found itself embroiled in a conflict so complex that it threatened the very existence of the company. AAR had launched a complicated and aggressive campaign of shareholder activism against BP, which some observers saw as the Kremlin trying to reassert government control over the lucrative oil and gas industry. The extent to which these two forces were working in cooperation remained unclear. But the conflict, which had been growing steadily since March 2008, reached new heights when TNK-BP CEO Robert Dudley had his work visa revoked and left the country on July 24. As these events unfolded, all eyes were on Russia, with domestic and international observers wondering how the conflict would ultimately be resolved and what affect it would have on Russia’s position in the global economy. More specifically, BP’s chief executive, Tony Hayward, was being closely watched as he sought to determine BP’s next move.

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