BP’s Russian defeat a market victory

MOSCOW – If anyone needed convincing, the paper that BP, formerly known as British Petroleum, signed on Thursday with Mikhail Fridman and his Russian shareholding partners proves that defying the law of gravity is unlikely to succeed for long; even if the world’s weakest prime minister, Gordon Brown, and his disloyal foreign minister, David Miliband, have tried to stake their short-term political careers on it; and even if the Financial Times of London has tried to make the inevitable fall appear to be a masterly exercise in BP negotiating skill.

In the middle of 17th century Paris, Savinien Cyrano de Bergerac (that’s the real one, not the 19th century stage character), wrote a fantasy about a voyage to the moon. He described several contrivances to get there, in addition to his own. One, which reportedly delivered the biblical prophet Elijah, involved a large magnetic ball and an iron chariot. To propel the latter into the sky, and thence to the orbit of the moon, the prophet tossed the ball into the air so that the magnetic force would draw the chariot after it. He was obliged to keep catching and tossing to sustain the upward momentum. When it was within gravitational range of the moon, the magnetic ball was tossed downward, and then upward again, to break the speed of the chariot’s fall.



Russia isn’t the moon. But BP has been trying a variant of the magnetic-ball-and-chariot to hang onto the 23% of its global oil reserves located there, 25% of its current oil production, and a comparable amount of its market capitalization. Rarely has so much value in global energy resource depended on such a theory of motion. Robert Dudley, chief executive of TNK-BP – the 50/50 joint venture BP has operated for five years with Fridman, Len Blavatnik and Victor Vekselberg – has also been using several quaint contrivances to defy the laws of gravity.

Dudley was found out, having tried to negotiate secretly with Russia’s Gazprom the sale and purchase of the 50% stake in TNK-BP owned by the Russian trio – collectively known as AAR, reflecting the names of their holdings, Alfa, Access and Renova.

Asia Times