BP is heading towards a fresh start in Russia after the announcement it has sold out its stake in the TNK-BP joint venture to state-owned oil giant Rosneft.
It is a cash-and-share two-part deal worth in total some 42 billion euros, as in return BP also gets 19% of Rosneft, making it the second-largest shareholder after the Kremlin, and giving it a seat on the board.
It promises to be a unique partnership, as analysts say BP will have little say in how Rosneft is run, which will primarily be in the interests of the Russian government and people. The new Rosneft will dominate the world market, but size is not everything.
“Whether or not the creeping influence of the Russian state over these incredibly important sectors to the Russia economy is a good thing for investors remains to be seen. I rather suspect it isn’t necessarily a good thing. Things may turn sour, particularly if oil prices start to fall,” said Capital Economics’ Neil Sheering.
The Kremlin now exerts a much tighter hold on the economy than when companies like BP moved in in the 1990s, and Boris Yeltsin was desperate for foreign investment.
While the deal does rid BP of a difficult business partner, AAR, there is no guarantee it has not swapped them for someone worse.