The New York Times is reporting that BP is looking to sell its 50 percent stake in TNK-BP, its joint Russian venture, for upwards of $30 billion. ”Disputes with BP’s Russian billionaire partners in the joint venture and threats of legal action had cast a shadow over the investment,” write Julia Werdigier and Andrew Kramer.
TNK-BP chairman Mikhail Fridman resigned earlier in the week, suggesting trouble in the company - a sentiment echoed by a statement issued Friday by Alfa Access Renova, or AAR, which is BP’s Russian partner in TNK-BP:
It has become apparent that the parity ownership structure has become inoperable given fundamental differences over strategy and governance between A.A.R. and BP.
Analysts were not all that surprised about news of the impending sale, given the difficulties Western companies often have doing business in Russia. Jefferies & Co. analyst Iain Reid told the Times that in Russia, “Corporate governance and trust has collapsed, [TNK-BP] is not paying dividends, and they can’t take broad decisions. It’s probably more trouble than it’s worth at the moment.” Read more here.
Russia Profile begins an article summing up Dmitry Medvedev’s presidency, which is coming to a close Monday, in a rather stark and negative manner:
Russia’s outgoing President Dmitry Medvedev probably never wished to end his term this way. His economic achievements, after four years in office, were minimal, and often had no visible impact in peoples’ day-to-day lives.
But the truth hurts sometimes. Medvedev came in with all the bluster of a reformer, but that sentiment wore off quickly, as he proved to be unable to enact meaningful economic reforms or emerge from the shadow cast by his predecessor / successor. The British Independent also has a scalding look-back on Medvedev’s tenure, quoting a Russian woman named “Masha,” who oversees the fake “Kermlin” Twitter handle:
[Medvedev's term] was like when it snows in the night and the machines come and clear it up before dawn. When you wake up, there is a vague feeling it has been snowing, but hardly any sign of it. That’s the level of impact he has made.
Read more on Medvedev in Russia Profile and the Independent.
ExxonMobil CEO Rex Tillerson (left) and Russian Prime Minister Putin (GETTY IMAGES)
Pavel Ivlev, founder and chairman of Committee for Russian Economic Freedom, released the following statement today on the Exxon-Rosneft alliance:
Through today’s agreement with Exxon, Rosneft has finally managed to give an aura of legitimacy to its theft of assets stolen from Yukos and its shareholders, including hundreds of American investors, as well as its CEO, Mikhail Khodorkovsky, who languishes in a Russian prison for crimes he did not commit.
Perhaps more than any other company, Exxon understands the pitfalls of conducting business in Russia, and while it is willing to assume the risks, the company must also seek opportunities to advocate for the pro-business reforms needed to make Russia a safer, freer place to invest and conduct business.
As it becomes a key partner to a Kremlin-run concern, Exxon can either play a formative role in pushing for much-needed rule of law protections in Russia or it will bear responsibility for abetting the Putin regime as it launders its ill-gotten gains and seeks to expand its personal wealth at the expense of the Russian people.
In a Moscow Times op-ed, Kim Iskyan, a Moscow business consultant and former hedge fund manager, says he believes President-elect Vladimir Putin will consolidate the state’s controlling interests in a number of Russian banks – and not divest as current President Dmitry Medvedev has predicted.
Last week Medvedev gave signals that the state would relinquish its controlling stakes in Sberbank and VTB, which would signal a major policy shift. But Iskyan’s not buying it:
[I]t’s not going to happen. Everything that Medvedev says has the half-life – and credibility – of a snowflake in May. More important, President-elect Vladimir Putin is more likely to ride a candy apple-red tricycle in Red Square clad in a pink tutu than he is to allow his government to relinquish control over state banks. […] Since 2001 Sberbank (57.6 percent held by the state) and VTB (75.5 percent state-held) have [been] reaping the benefits of sleeping with the state – including too-big-to-fail status, political favoritism, access to cheap capital and a work-with-us-or-work-with-no-one approach to garnering business.
Iskyan says the state’s large role in banking hurts economic competitiveness and stifles the economy as a whole.
Private capital is driven away, with state banks gaining access capital at much lower interest rates.
Read more of Iskyan’s analysis here.