Follow-Up: Exxon Mobil Looking Smarter Than BP?
from
September/October 2005
by Craig Mellow
Forget the fat lady. It’s not over until the babushka sings, and by most accounts she’s warming up. The “it” in this case is oil giant BP’s Russian joint venture, TNK-BP. That highly profitable oil deal had been under pressure from both disgruntled minority shareholders and the Russian government, increasingly uneasy about having half of its No. 2 crude producer in foreign hands. But just as it seemed that tensions were easing (“War—And Now Peace?—Inside a Russian Boardroom,”
Corporate Board Member
, March/April 2005), Robert Dudley, TNK-BP’s American CEO, broke the news that his company had received a bill for $1 billion in back taxes dating to 2000.
Is the joint venture about to go the way of Russia’s former top oil producer, Yukos, which was dismembered because of some $27 billion in alleged unpaid taxes? Dudley was concerned enough to break his normally diplomatic public demeanor, telling a London conference, “Russia is inadvertently becoming more difficult to navigate for well-intentioned investors.”
Chances are the tax dispute will blow over without serious harm to TNK-BP, which earned more than $400 million in the first quarter of this year. “Every company besides Yukos that has had one of these big tax claims has been able to negotiate it down,” says Steven Dashevsky, director of research at Aton Capital in Moscow. A more serious threat to the venture’s long-term future may be the Kremlin’s determination to keep new exploration of “strategic” oil fields restricted to companies with majority Russian ownership. TNK-BP is a fifty-fifty deal.
All this confusion may make Exxon Mobil, the world’s biggest oil company, look prescient. Back in December its wary CEO, Lee Raymond, put a wait-and-see hold on any major investment in Russia.
