ROBERT DUDLEY had a suitcase packed on Friday, ready to leave Russia. The chief executive of TNK-BP thought he was going to be kicked out by the authorities, but they relented, letting him stay for another 10 days while they determine whether he has the right to work there.

The mind games over Dudley’s visa are the latest scuffle between BP and its Russian partners over control of TNK. The stakes are high. Russia is the second-largest producer of oil after Saudi Arabia, and TNK is its third-biggest asset. It is a critical source of growth and profits for BP, which like most western oil companies is struggling for both.

BP struck the TNK joint-venture deal in 2003 in what was hailed as a trend-setting piece of Anglo-Russian co-operation. Relations have soured in the past year, however, with the local partners accusing BP of mismanaging the company and running it for BP’s benefit. Mikhail Fridman, the billionaire who is one of the TNK investors, makes the arguments in a rare interview (see links below).

BP says the criticisms are nonsense. Whatever validity they do have, it is clear they obscure a much bigger game that is afoot, one to do with economic nationalism rather than shareholder returns. The Kremlin has in recent years steadily asserted its control over what it considers key national assets in the sector. After the destruction of Yukos and marginalisation of Royal Dutch Shell at the Sakhalin gas field, TNK is next on the list.

BP is a big, tough company, and knew when it first went to Russia what it was getting involved in. The TNK relationship, in fact, grew out of a scrap between BP and Fridman when it accused him of stripping assets out of another oil company, Sidanco, in which BP held a stake. In the pursuit of riches, it has chosen to lie with some odd bedfellows.

In a battle with the state, though, it is defenceless. The Kremlin will in the end take TNK if it wants it. Riding roughshod over BP’s rights, however, will harm Russia’s interests. It still needs western expertise and money to develop its economy — and ostracising groups like BP will make others less willing to help.

Sweet prospects

EIGHT months ago I pointed out that Harbinger, a New York-based hedge fund, had built a 5% stake in Tate & Lyle, the British sweetener firm.

That interest has since more than tripled to nearly 17%, and although Harbinger’s stake is worth less than it paid, there is clearly the hope of a bigger prize down the track. That must either be in the form of a re-rating of the British group’s shares or a takeover.

Harbinger has just banked a big profit from its 6% stake in Corn Products International, a rival US ingredients firm that has just agreed to be taken over by Bunge, an American fertiliser producer and oilseed processor.

Has Harbinger seen the same opportunity at T&L? In the US, T&L’s peers enjoy a much higher stock rating and what is often overlooked at T&L is that the big driver of its future profits is its American ingredients business.

American value investors are good at exploiting cheap opportunities. We saw the same with Cadbury, the confectionery group, a few years ago when domestic investors sold out just as US fund managers were buying in.

American investors now account for 30% of T&L’s equity. The shares are underpinned by a 5.5% yield, but the bigger prize could ultimately be a takeover. Cazenove says a takeover price would have to be at a 50% premium and cites Bunge as the most likely candidate.

Such a move is not imminent, but the situation is worth watching and the transformation of the group by Iain Ferguson, its chief executive, over the past five years, means the downside is limited. The big capital expenditure programme has now largely been completed.

Tenants’ revolt

THE action taken by some of the big names in retailing to force their landlords to abandon quarterly advances in rental payments is unprecedented. It challenges the feudal and often adversarial relationship between landlord and tenant that has existed for decades. The rebellion by retail tenants comes at a time when trading conditions are at an all-time low.

The difference between paying rent monthly in advance rather than quarterly has a huge impact on cash flows. Landlords will be very reluctant to change. A three-month rent in advance provides a useful safety net if tenants, particular smaller ones, are made bankrupt.

Landlords have a legal right to ignore the protest, but they would be foolish to do so. As the internet gains an ever-increasing share of the consumer’s cash, it is vital that landlords and occupiers have a co-ordinated approach to attracting shoppers. This is of mutual benefit and a move to monthly payments would be a step in the right direction.

Such a move does not undermine the investment attractions of the property as the tenant is still locked in to five-yearly reviews and long leases. And big tenants such as Boots, BHS and Carpetright are not about to go bust. The times are changing and the property industry must change with them.

Leverage losers

WE are starting to witness the unpleasant side of leverage, when using borrowed money to build stakes in companies works against you, rather than for you.

Over the past five years we have seen huge fortunes built from taking out leveraged positions on the future movement of share prices. It was originally the speciality of hedge funds but then it started to attract wealthy individuals. Many have enjoyed some big successes — but one call can cause lasting damage.

Mike Ashley, the sports-shop tycoon, lost £200m when shares in HBOS went down rather than up. Jack Petchey, the veteran sharedealer, learnt about leverage late in life and in recent months has lost some £200m on paper.

Then there is Robbie Tchenguiz who has taken hedged positions in J Sainsbury and Mitchells & Butlers. These are now some £600m under water and last week Sean Quinn, Ireland’s richest man, disclosed that he and his family are buying a 15% stake in Anglo Irish Bank after having lost more than £200m by investing in the bank through derivatives.

And don’t forget Guy Naggar and Peter Klimt, the owners of Dawnay Day. They lost £80m from the fall in F&C Asset Management’s share price. Their position was 95% geared. Ouch.

john.waples@sunday-times.co.uk

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