BP, Russian Partners Vie For Control of Oil Venture

MOSCOW, June 16 -- A bare-knuckles boardroom battle has broken out between the British oil giant BP and its Russian partners over the direction and control of a prized joint venture, TNK-BP, which is Russia's third-largest oil producer and a key source of oil reserves for the international energy giant.

Mikhail Fridman, one of the Russian partners, charged Monday that BP had stifled growth at TNK-BP by treating it as a subsidiary rather than an independent company. He demanded sweeping changes in management.

BP officials countered that the Russians orchestrated tax investigations and a recent raid by domestic security agents on the company's offices. By using such pressure tactics, BP contended, the Russian partners were attempting to wrest as much control as possible in advance of a sale of their stakes to a state-controlled company such as Gazprom or Rosneft.

"This is just a return to the corporate-raiding activities that were prevalent in Russia in the 1990s," Peter Sutherland, BP's chairman, told reporters in Sweden last week.

The fight is being closely watched by foreign investors to see if and how the Kremlin will intervene and whether BP's investment will be protected. In recent years, Gazprom has seized majority stakes in a number of foreign-controlled energy projects that had become the targets of potentially crippling investigations by state agencies.

In a news conference Monday, Fridman laid out a list of grievances, including what he called TNK-BP's dismal performance compared with other Russian energy companies' and BP's rejection of 20 international projects on grounds that they would compete with other BP projects. He denied that the Russian partners wanted to cash out their stakes. "We're not selling anything, and nobody's approached us," he said.

Fridman said he and his partners would file suit in Russian court to stop TNK-BP's annual general meeting on June 26 and would look for "legal means" to dismiss TNK-BP's chief executive, Robert Dudley, whom BP strongly backs.

"Any other board would have dismissed its CEO a long time ago, and any other 50 percent shareholder would have initiated legal action to ensure that directors perform their fiduciary responsibility," Fridman said. "We need foreign investors that will help ensure the growth of Russian companies, not constrain their development."

He said TNK-BP should have a chief who is "an independent head of an independent company and not a BP branch as is the case now."

TNK-BP is a 50-50 venture between BP and three Russian entities: Alfa Group, of which Fridman is chairman; Renova Group; and Access Industries.

During Vladimir Putin's eight years as president of Russia, many business leaders who made their fortunes in the turbulent 1990s faced exile or court action, notably Yukos Oil founder Mikhail Khodorkovsky, who is in prison for tax evasion. BP's partners, in contrast, all prospered during the Putin years.