Jeremy Warner's Outlook: BP faces showdown with Russian oligarchs

Once bitten, twice shy. BP would claim it was indeed following this salutary advice when it returned to Russia in 2003 to sign a joint venture agreement with the same oligarchs who had fleeced the company of its previous Russian involvement a few years earlier. This time there were to be cast-iron corporate governance arrangements which would safeguard BP's interest. Western standards of rule of law would be applied.

Well, maybe these standards will eventually prevail, but it doesn't look that way at the moment. The oligarchs are again doing all within their power, which seems to include extensive influence within both the judicial and government machine, to squeeze the company out.

In the absence of a last-minute reprieve, most of BP's senior team in Russia including TNK-BP's chief executive, Robert Dudley, will have to quit the country, having been refused work permits. For months now, Mr Dudley hasn't dared return home to the UK for fear he wouldn't be allowed back in. Now he may be forcibly removed, rather in the manner of members of the British embassy in the tit-for-tat expulsion of diplomats that has long characterised Anglo-Russian relations.

Having been bitten once, BP deliberately set up the arrangements surrounding TNK so as the prevent the same thing happening again. These arrangements, which give BP management control of a company jointly owned with the Russian oligarchs, are now being put to the test. The fear is if the management team is ejected it will be that much more difficult to protect the company from the pilfering oligarchs.

Properties might be disposed of without BP's permission, as occurred last time around, or the company might in other ways be asset-stripped, by, for instance, gearing it up with debt.

In any case, Tony Hayward, BP's chief executive, is determined not to be bundled out of his Eastern investment. Russia is BP's most important single asset, accounting for 25 per cent of reserves, 20 per cent of production, and 15 per cent of profits. It would be disastrous for the company if it were forced into a disorderly divestment.

Are the oligarchs acting out of naked commercial interest alone, or do they have the backing of the Russian government in making life so uncomfortable for BP? We still don't know the answer to this question. If it is only the former, then with a degree of compromise, say by paying out a larger dividend, it may be possible for BP to resolve the situation without undue damage to its ongoing position in Russia. If it is the latter, it is much more serious.

At some level of government, there is obviously active connivance in what the oligarchs are doing. They seem quite easily to be able to win rulings against BP. What is not clear is how far up the ladder of power this influence stretches. Who is pulling the strings? Is it the oligarchs who are managing to manipulate the lower echelons of government bureaucracy, or does it come straight from the top, with the regime using the oligarchs as a convenient smokescreen for strong-arming BP out of Russia's natural resources industry?

Even BP doesn't pretend truly to know the answer to this question. The Russians were very keen to have Western expertise and capital when the economy was down in the dumps. With Russia's oil wealth now flowing freely, the boot is on the other foot.

Yet by the same token, the Russian government doesn't want to be seen to be drumming BP out of town. For Russia to be closing its doors to foreign investment and the rule of law would send out the wrong messages to the rest of the world.

TNK-BP is Russia's third largest oil and gas company, and the only one of the three without any form of state involvement. Eventually that will change, with either Rosneft or Gazprom taking control. Mr Hayward faces his toughest challenge yet in ensuring that BP stays in as the other partner.