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Excerpts from the JRL E-Mail Community :: Founded and Edited by David Johnson

Oil on troubled waters

President Dmitry Medvedev indirectly criticised former Rosneft chairman Igor Sechin for not doing enough "due diligence" before proposing the share swap with BP.

It's difficult to see, however, what Sechin could have done about the clash of interests within TNK-BP.

And though Rosneft says BP has made new proposals, after the expiration of a deadline on a $16 billion deal to swap shares and develop the Arctic shelf, Rosneft will be keen to talk to other partners, from Exxon and Chevron to Royal Dutch Shell.

The collapse of its share-swap proposal with Rosneft is another headache for BP, which was looking for a triumph after its Gulf of Mexico, Deepwater Horizon oil spill.

And it suggests Robert Dudley has not, as was the interpretation in the media when he took the helm at BP, overcome his troubled relationship with the oligarch shareholders in TNK-BP.

These are the same people who said he was unfit to lead TNK-BP, deny they used political clout to interrupt the renewal of his work visa, but effectively forced him to leave Russia in 2008.

When TNK-BP was established in 2003 it was the largest-ever foreign investment in Russia at the time, launched at a ceremonial signing in the presence of then-President Vladimir Putin.

The 50:50 ownership structure neither helps decision making nor provides a clear corporate role. It remains a collection of interests, which must all be aligned before it can take a step.

Putin has since said he has misgivings about the structure of the company and, famously, at the start of BP's talks with Rosneft over Arctic exploration, warned Dudley to beware the oligarchs.

Tactics aside, in both 2008 and 2011 the problem was the diverging interests of BP and its Russian joint venture.

Just as in 2008, AAR feels that BP tries to run TNK-BP as a subsidiary that it only half owns. While BP sees a vehicle for gaining access to Russian oil and gas fields, AAR sees a business opportunity to expand Russia's limited refining industry, market energy products across Russia and expand beyond the Commonwealth of Independent States. BP thinks that would compete with its international business.

While TNK-BP remains a success story in terms of oil production and exploration, there seems no easy solution to a troubled relationship.

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