BP’s unhappy marriage to the Russian oligarchy

The BP chief executive, Tony Hayward, is a man who knows exactly what his business needs to survive during difficult times: stability. He must also be only too well aware that, in this most volatile of businesses in a volatile world, he is likely to encounter mixed fortunes.

First, he makes no secret of his ambition to see oil at a long-term price range of $60 to $80. He said as much at the Davos World Economic Forum last week, and it’s an idea that finds ready support in Opec circles. A $70 barrel, say, blends Opec’s needs for development with the oil giants’ need for a return on their investment, and doesn’t threaten global economic growth.


Yet Opec’s attempts to balance supply with demand have rarely been entirely successful, and BP’s management and shareholders may have to cope with oil at considerably lower levels than $60 to $80 such is the “destruction of demand” described by the Opec secretary general last week. Still, longer term, oil should return to a profitable level, so Mr Hayward may eventually get his wish.

Second, and even more dicily, he is committed to trying to make BP’s joint venture with four Russian oligarchs work. This is a far tougher job than trying to fix the price of a barrel of West Texas Intermediate. The oligarchy redefine the word “challenging”. BP’s joint venture in western Russia, TNK-BP, has been an unhappy marriage since it was contracted in 2003. It is of huge strategic importance for BP