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The trouble with Russians is that they speak in riddles

Robert,

BP is (financially and economically) 'interesting in that for many of us the shares from part of the investments of our pension funds and the flow of dividends provides those that manage these funds, and provide annuities, a means of paying our pensions.

These deals in the former USSR give BP (shared) access to the vast natural resources of the region and so may provide financial stability ion the long term - however this all rather depends on the rule of law being rather more strictly enforced in the firmer Soviet block than it has in the past, and indeed than it is at present.

I think I will not be alone in wondering just how the "the billionaire oligarchs" will manage to hang onto their assets in the face of developing demands in the former Soviet block for a fairer and more legally equitable system over time and if so I wonder if BP is selling us (the investor) something that it may not be able to deliver - even if it has watertight contracts. (I note you wrote above: 'what would be an "interesting" valuation of TNK-BP?') It would be an error for us to overlook this nascent 'problem'.

Businessmen are not cold, money-making computers. They can become emotionally involved in their enterprises. They can become offended, feel betrayed and want revenge.

Mr Vekselberg and his colleagues want to humiliate BP. And they are succeeding.

Emotion means that he is looking for compensation as well as the market price. It is a pity BP does not have a premier division football team they can offer Mr Vekselberg to make him feel better.

#2 John From Hendon makes the key point that there is a large element of political risk in BP's investments in Russia. However, that is the case in varying degrees in almost every oil investment because states own the licenses, the legal systems etc required to operate (i.e. explore, produce and export hydrocarbon).

Of course its not just oil as other types of business have the same issue but perhaps not to the same extent as applies to oil as it is such a valuable commodity and needs to be produced and exported across infrastructure that can be seized at will or taxed or otherwise approriated by a state that chooses to do so. Only two things stop this happening every week everywhere. Firstly some states (by no means all) see big oil cos as a useful source of both technical and financial capital so dont want to behave in a way that would preclude such an investment in the furture. Secondly the buyers of the end product (ie US and others) have economic leverage and a bunch of tanks aircraft carriers etc so the ability to get mean if the state with the oil reserves doesnt want to play ball. Neither of these levers are likely to work as well with Russia as with some other states - in fact Russia has a previous history of using the oil and gas supply politically by demonstrating a willingness to turn of the taps - so there is certainly a risk even if the Russian state remains a rock solid stable entity.

The question is how would you price the risk and is it on ballance worth the potential reward of the access to reserves ?

Answer - very difficult to price the risk -

One would therefore hope that BP's board have done a better job this than they seem to have done in managing their relationship with AAR.

The point about political risk is well made and, on a wider scale, is the reason that the banks will be very cautious about jumping ship.

But the value and the risks are irrelevant. After a series of disasters this has more to do with the BP board saving face.

Mr Vekselberg, isnt this the guy that the Swiss government had dealings with over share price manipulation ??? among other international problems he has had over his take on how business should be done.

At some point the Russian people are going to oust these oligarchs, who in the name of the Russian people have amassed vast personal fortunes, it will take time but it will eventually happen.

Where would that leave BP or any other company with Russian investments then ??? it would be wise in my opinion not to get too heavily involved in Russia, but business is business i suppose morals and ethics dont come into the equation.

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Its nothing whatsoever to do with hurt feelings or emotion, its about loss of face pure and simple. Reputation as being strong in business is vital to impose their will on these markets, still emerging from the soviet past. Whatever happens at international level is a lot more "fluid" internally. And they know this because that's how they accumulated their wealth in the first place. A show of strength is vital to maintain their position of influence.

Interesting point John from Hendon regarding the likelihood of the state imposing control or severe restrictions on the capitalisation of resources vital to the state. At some point the resources will be restricted to the point that national security will overtake the will of the markets. Of course the proposed valuation might also reflect the real value of the dollar, or its perceived value in the coming months.

#7 AqualungCumbria

You are right. These oligarchs don't realize it yet but they are living on borrowed time.
To keep their position they must put in place powerful managers and also toady up to politicians.
And that is where they will come unstuck.
Some day those people will do without them.
I have no idea when.
Just like I have no idea when Mugabe will be ousted.
It will happen though.

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Deal not yet dead in the water...
Rosneft has agreed to BP鈥檚 request to extend the deadline for the companies鈥� share swap agreement by ONE MONTH (from April 15th). This will be pending the final decision of the Arbitration Institute of the Stockholm Chamber of Commerce.
This allows temporary action previously blocked in BP鈥檚 existing joint venture with Russia's, TNK-BP.
Rosneft President, Eduard Khudaynatov: 鈥淲e hope to see the dispute over the Russian Arctic offshore projects between TNK-BP鈥檚 Russian and British shareholders resolved in the international tribunals.鈥�

Robert, well thank you for reporting in your own inimitable way.

Actually, it doesn't matter a toss what any oil companies do, according to ordinary working people getting to and from work on a minimum wage. The cost of food up by 20% on top of UK tax on fuel duty passed on to poorest who are most affected.

To anyone who dares to say that food is zero rated for VAT - back off - everything is subject to 20% VAT and that cost ends with the consumer picking up the tab!

Food is zero rated for VAT.

Okay, Robert, let me put this situation in another way altogether: In my opinion, Russia wants no part of BP and the crocodile tail it drags around with called Macondo.
In fact, Russia really wants Rosneft & LUKoil, to plan the work, set up the corporate structure, etc. In fact Russia wants this done ASAP, like August 1, 2011.
Both companies are state companies. Both will prepare proposals on the projects quickly, as in one month after forming ventures. If any billionaire is going to be involved it will be Vagit Alekperov - LUKoil's billionaire CEO.
Alekperov's counterpart at Rosneft is Eduard Khudainatov. The gentlemen have agreed to share export infrastructure in the northern Nenets region and cooperate on natural-gas transportation from
- Rosneft's Vankor deposit and
- LUKoil's Bolshekhetskaya Depression fields.
Where in this tight little grouping can you see any room for BP, except out the door?
The companies may combine to work untapped oil fields in the Nenets region by building a unified transit network to LUKoil's export terminal at Varandei on the Barents Sea.
Where in this tight little grouping can you see any room for BP, which will never be invited in the door.
LUKoil agreed to buy a 25% stake in a venture with Bashneft to develop the Trebs and Titov oil fields in the Nenets region and did so April 15th. A previous project between LUKoil and state-controlled Gazprom Neft to seek resources in the same region may collapse as Rosneft looks to be a stronger partner.
Yet, still - where in this tight little network can you see room for BP, except back to less stringent and less careful oil exploration and drilling?
LUKoil and Rosneft are also looking into exploration in the Black and Caspian seas..
LUKoil and Rosneft are partners already in the North Caspian project.
The companies also have a venture to explore and develop the Temryuksko-Akhtarsky block in the Azov Sea. The new ventures would target other reserves, according to LUKoil.
If something seems to be subtly whispering in your ear that BP is not welcome, you may just be hearing the message correctly.
How exactly this is going to work out, well...you've got me!

14. At 17:42pm 26th Apr 2011, Abysmillard wrote:
Food is zero rated for VAT.

@ 16. At 08:24am 27th Apr 2011, AnotherEngineer wrote:

>> 14. At 17:42pm 26th Apr 2011, Abysmillard wrote:
>> Food is zero rated for VAT.
> Correct, and all the VAT paid along the supply chain is reclaimed.

Even if you don't use it as food. My car runs well on corn oil, but it smells like a chip shop!

#16. At 08:24am 27th Apr 2011, AnotherEngineer wrote:

"Correct, and all the VAT paid along the supply chain is reclaimed."

Non corporate workers in the supply chain cannot reclaim VAT. So any increase in VAT results in hardship for those already being paid low wages.

This together with the banking catastrophe shows us that the truth is that Governments now control nothing. Multinationals now control Governments and strategically any sale of British Petroleum would be a disaster for Britain. We are not far now from the the terrifying concept of multinationals controlling nations. What with Bill gates on the information side, Oil and Gas controlled by Rosneft and the banking system telling us we can all go to hell there's not much left for any Government to control.