FOR a man at the centre of the most bitter corporate Anglo-Russian battle in
history, Mikhail Fridman, chairman of the oil giant TNK-BP, seemed
remarkably unruffled. Casually dressed in linen trousers and an open-necked
light-blue shirt, the billionaire was at his desk surfing Russia’s most
popular social-networking website as I was ushered into his Moscow office.
A few days earlier Fridman and three other Russian tycoons, who together own
50% of TNK-BP, had failed once again to remove Robert Dudley, the venture’s
BP-backed chief executive. The position of the two sides had become even
more entrenched and the atmosphere at the company’s headquarters was said by
one insider to be “brutal”.
Far more is at stake than control of the British-Russian joint venture. The
outcome of the clash, which is being closely watched by big business, the
Kremlin and Downing Street, could have an impact on foreign investment in
Russia and on the country’s image abroad.
Far from appearing under pressure, Fridman was bullish. “I have no doubts
whatsoever that soon me and my Russian partners will achieve what we want,”
he said. “Common sense will prevail. All will be well and we’ll have our
way. We are perfectly capable of protecting our interests. As far as we are
concerned there can be no compromise on some issues. What we want is simple
and reasonable: for TNK-BP to be an independent company and not be treated
as a subsidiary of BP.
“I don’t think this conflict is bad for Russia’s image. It’s important to send
the right message to foreign investors. Russia welcomes foreign investment
but only that which helps Russian companies to grow. We don’t need foreign
investment that creates problems for Russian companies. This is a
high-profile shareholders’ clash - it’s not about democracy, the rule of law
in Russia, the Kremlin and all that propaganda about nasty Russian
businessmen.”
The row between BP and Alfa-Access-Renova (AAR) - the consortium of Russian
shareholders made up of Fridman and fellow billionaires Viktor Vekselberg,
Leonard Blavatnik and German Khan - was stoked up further last week when a
group of TNK-BP’s Russian managers launched a lawsuit against Dudley. They
accuse the chief executive, who still has BP’s confidence, of mismanagement.
Dudley’s future was still in the balance last week after a decision to extend
his Russian visa by only 10 days pending clarification about his work
contract. BP claims Dudley has a contract enabling him to keep working but
AAR says it expired in December.
Dudley rejected the allegations made in the lawsuit and warned that the bitter
infighting “would tear the company apart”. AAR, however, is determined to
remove him because it claims he is too close to BP to act as an independent
chief executive.
His dismissal, said Fridman, AAR’s largest shareholder, is a demand on which
“there can’t be any compromise and won’t be any compromise. We want a new
chief executive who is not from BP but hired on the open market.”
BP has already suggested Dudley would still be entitled to run the group from
abroad. Dudley’s latest problems come after months of wrangling over visas
and work permits for the company’s 85 foreign staff, many of whom have had
to leave Russia. Others have been barred from the TNK-BP building.
Fridman, 44, said he supported the Russian Migration Service’s action against
the employees as he claimed the company had broken employment laws, but the
tycoon strongly denied he had used his influence over Russia’s bureaucracy
to start the trouble. TNK-BP has also had problems with Russia’s tax police
and the FSB, the former KGB, which accused one of the oil company’s
employees of being a spy.
“All this has nothing to do with me or the other Russian shareholders,”
insisted Fridman. “The tax problems started long before our conflict with BP
and the FSB scandal hurt us as much as it did BP.
“It’s true that in Russia there are closer ties between business
and politics than in the West but we haven’t turned to anyone to solve our
problems with BP. We don’t need any help. If the Kremlin had been involved,
as some have falsely claimed, it would have had no problems removing Dudley.”
In what threatens to become a legal quagmire, AAR is preparing writs against
BP over its use of secon-dees, foreign staff employed at TNK-BP’s Moscow
offices, as well as over its appointment of board members at some of
TNK-BP’s subsidiaries.
BP for its part is seeking the removal of Khan, the oil giant’s executive
director, and the legal and security chiefs because it believes they have
sought to put pressure on BP’s position in the venture and have defied
Dudley’s instructions.
BP has also started legal action against the tycoons over tax payments of
£180m which it says predate the merger with AAR and should have been settled
by the four billionaires. AAR says the claim is inflated and proof of BP’s
“bullying tactics”.
Last month BP accused Fridman and the other Russian tycoons of a “return to
the corporate raiding” typical of Russia in the 1990s and said the clash was
a “dispute over control - and perhaps ultimately ownership of the company”.
Fridman, whose fortune is estimated by Forbes at over £10 billion -
making him the world’s 20th richest man – accuses BP of entering
secret partnership talks with Gazprom, the Russian state energy giant.
BP denies it was seeking to switch partners but AAR is adamant the British
company breached its trust and behaved unethically by seeking to have
Gazprom buy out the Russian shareholders’ share. Fridman said he and the
other billionaires were “very upset, to put it mildly”, but insisted the
secret talks were not the reason for the present battle - “only an excuse”.
The struggle, which Gordon Brown brought up earlier this month during his
first meeting Dmitry Medvedev, the new Russian president, is about TNK-BP’s
independence from BP, said Fridman. The British-Russian joint venture has
been underperforming because its expansion outside Russia clashes with BP’s
global interests.
Proposals by the Russian shareholders to buy refineries and retail networks in
Europe to increase TNK-BP’s margins and extend its reach beyond oil
production were repeatedly thwarted by BP, said Fridman, who argued that,
compared with the Russian oil giant Lukoil, TNK-BP had been stagnating.
AAR charges that the venture’s BP-appointed managers - especially Dudley
- put BP’s interests before TNK-BP’s. To illustrate his point Fridman
produced a memo sent by Dudley in March which states that “We are not
authorised to with do business in Cuba, Sudan, North Korea, Syria, Iran and
Myanmar”. The explanation given for the ban, said Fridman, was that these
were countries hostile to America.
“But TNK-BP is a Russian-registered company, with reserves in Russia - it’s
not American,” fumed Fridman. “Take Cuba for instance. This greatly upset
us. Russia has been sending oil to Cuba for 40 years and spent tens of
billions of dollars on the island. Why shouldn’t we make the most of our
political advantage to grasp such opportunities? It’s nonsense.
“Why can’t we do business with Syria when Lukoil does? It may not be in BP’s
interest but for TNK-BP it’s more than good business sense.”
Fridman also disagreed with comments made recently by Vladimir Putin, the
former president, who is now prime minister. Putin, who oversaw the TNK-BP
merger in 2003 claimed to have warned both sides that a 50-50 equal
partnership would fail. Fridman believes the structure can be made to work
and does not regret merging with BP.
For the bitter conflict to be resolved, however, AAR will not be satisfied
simply with Dudley’s removal. His replacement must come from outside BP’s
ranks, the management and board must be more independent of BP and the
company must be allowed to develop and expand even when its goals come into
conflict with BP’s.
“Our demands are reasonable,” said Fridman, who added that he had not expected
the TNK-BP merger to be without problems but was naïve to imagine they would
not be serious. “Ultimately the main problem is an emotional one,” he said.
“Since we are not professional oilmen, BP appears to have thought of us as
oligarchs who became rich by chance as a result of the chaos of the 1990s.
And that most of all we would be interested in having fun with yachts,
private Boeings and football clubs.
“But we’re very hands-on businessmen who take a keen interest in making sure
our investments are as profitable as possible. TNK is our baby. We bought it
when it was bankrupt and turned it into a success. We’re not trying to take
over anything. We want an independent company. And we’ll succeed.”
