Jeremy Warner's Outlook: BP caught up in aRussian bear-hug

When I was a child, there was a drama series on TV called Mogul – later renamed The Troubleshooters – which was all about the oil industry. Red-in-tooth-and-claw capitalism and ruthless boardroom chicanery were the presiding themes of this imagined tale of hard-living oil men. You don't need fiction any longer to see this world in action. Out in Russia, it's being played out for real as BP battles its Russian partners for control of the country's third largest oil company.

BP has been here before, albeit with not quite as much at stake. The same three oligarchs trying to drum BP out of town today were its partners during BP's first foray into Russia in the 1990s. Big write-offs followed as the treacherous oligarchs asset-stripped the investment from under BP's nose. Dancing with the Russian bear, it transpired, was a dangerous business.

Once bitten, twice shy, you might have thought, but not a bit of it. Four years later, BP's then chief executive, Lord Browne, was back, this time with the apparent blessing of the Russian president, Vladimir Putin, to sign a supposedly bullet-proof partnership with the very same people who had so casually already taken him to the cleaners.

This time it was different, BP insisted. There were Western-style legal safeguards and standards of corporate governance built into a deal that would give BP 50 per cent of one of Russia's major oil companies. Even so, given what had happened and the already ongoing state sequestration of Mikhail Khodorkovsky's Russian oil assets, it was a gutsy deal to have done.

In the event, it paid off handsomely, and today TNK-BP accounts for as much as a quarter of the group's total production, a fifth of its reserves and, despite "tax/royalty" arrangements with the Russian Government which caps the company's share of profits at $40 a barrel, 13 per cent of net income. The money spent acquiring the interest has already been repaid several times over.

Nonetheless, this is plainly not an asset BP can afford to lose without punching a mighty hole in the balance sheet and future prospects. Winston Churchill, speaking about Russia's position in the war, famously said: "I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma." The same might be said of the current shenanigans around TNK-BP. Even to BP, the Russian motivation is a complete mystery.

What we do know is that the oligarchs have fallen badly out of love with their British partner and are now engaged in a systematic campaign of harassment against its employees in the TNK-BP venture. Already they have tried to get the British-appointed chief executive, Robert Dudley, sacked, and they also appear to have been obstructive in the process of visa renewal for British employees.

Whether it is them or the Government behind Mr Dudley's summons to appear before a criminal investigation into alleged tax evasion is unknown. In any case, Mr Dudley has got to the stage where he daren't leave the country for fear of not being allowed back in.

Someone wants BP out. Is it the Russian Government, or is it the oligarchs?

The best explanation seems to be this. Of the top three Russian oil companies, only TNK-BP is bereft of state investment. One or other of the TNK partners is under pressure to sell, either to Gazprom or Rosneft. BP is determined to stick with its investment despite the political dangers.

The Russian reserves are just too important to the country's future to make quitting an option. What's more, state-controlled Russian companies are not in the habit of paying generously for what they regard as rightfully theirs.

Tony Hayward, BP's current chief executive, reckons he's still reasonably well in with the Russian regime and feels under no pressure to sell, despite the deterioration in diplomatic relations between Britain and Russia. Part of the business of being a "troubleshooter" is to rise above national loyalties. Certainly, intervention on BP's behalf by the British Government is likely to do more harm than good, given the present poisonous state of relations.

So, if anyone is going to sell to the state, it must be the oligarchs. Indeed, they have been asked to do so. Rightly or wrongly, they seem to believe they will get a better deal if they are seen to be in control of the company, rather than just its junior partner. As things stand, TNK-BP is essentially managed by BP. Yet Mr Hayward, currently in Moscow for the Russian Economic Forum and the annual meeting of Rosneft, where BP is a shareholder, is determined not to blink.

Is this really about no more than the grubby business of money? Or should this be seen more in the context of Russia expelling the foreigner and claiming back her own. The missing part to the Churchill quote is that perhaps there is a key to the Russian enigma. "That key is Russian national interest." Russia is very pleased to have Western involvement and investment when the oil price is low, not at all keen now that it is high.

One way or another, BP will eventually be forced to cede control of TNK to the Russian state. But provided Mr Hayward plays his cards right, he should still be able to outmanoeuvre the oligarchs and retain what has come to be the officially tolerated foreign interest in Russian concerns of 49 per cent. One thing is certain. He has to succeed. Russia is too important to BP for him to fail.

Mr Putin claims to have warned BP when it signed up to the 50/50 arrangement that it was only making trouble for itself, as no one would know who was boss. Quite so.