The world’s second largest producer of oil, with a little under 10million barrels per day, is Russia. The politics of Russian oil is complex, and is best illustrated by a short story.
Last week Bob Dudley, the newly appointed boss of BP ( his predecessor Tony Hayward resigned after the Deepwater Horizon disaster) shook hands with Russian Prime Minister Vladimir Putin. They agreed a $16bn deal for in a joint venture between BP and Rosneft, Russia’s state controlled oil company, to develop Russia’s arctic oilfields. From a business perspective, the deal makes sense: Russia gains access to BP’s skills, and BP gains access to some unexplored oilfields. Politically, it’s more interesting. Before he became head of BP, Bob Dudley was head of a Russian joint venture called TNK-BP, and actually fled from Moscow in 2008 in fear of his life when it was intimated that he’s upset some of his Russian business partners. Dudley is still unpopular with the oligarchs who run TNK; they claim that BP has no right to do a deal with anyone else in Russia. Presumably he feels he’s safe now he’s got Vladimir Putin and the Kremlin on his side. Rosneft’s main assets used to belong to a company called Yukos, owned by another oligarch called Mikhail Khordorkovsky. Some years ago, Khordorkovsky and Putin fell out: Khordokovsky is now in jail and the assets of his firm were acquired at a knock down price by Rosneft, via a mysterious company registered at the address of a vodka bar in Tver, a small town north of Moscow.
This is what it’s like in the oil business in Russia.