beyondbrics

BP was fighting on Monday to save its planned $16bn deal with Russian state-run oil group Rosneft before the deadline on the deals lapses at midnight.

The UK group was in talks with Rosneft and with the Russian oligarchs who have blocked the Rosneft deal to protect their interests in BP’s existing Russian joint venture, TNK-BP. As the FT has reported, a buyout of the oligarchs – possibly for around $30bn – is one of the options of the table. But, with three parties to the negotiations, and the Russian state involved, nothing will be agreed until everything is agreed.

“There is interaction between the three parties about possible solutions … There are conversations, they are constructive,” said one of the people familiar with the negotiations, as Sylvia Pfeifer and Catherine Belton reported for the FT.

Another person close to the talks said the parties were making progress on agreeing a “fair market value” for the AAR [the oligarchs' consortium] stake in a deal that could give the Russian partners shares in BP and Rosneft, as well as cash, said Pfeifer and Belton.

An arbitration tribunal this month decided that BP’s proposed $16bn share swap with Rosneft could go ahead but only if the UK group allowed TNK-BP to take its place in any alliance to explore the Arctic with Rosneft.

The FT reported last month that BP had offered to buy AAR’s half share in TNK-BP for around $27bn but the oligarchs wwere holding out for $35bn and more. Today reports circulated that a deal might be done around $30bn.

But that may only be one sticking point. BP needs an agreement it can sell to shareholders, some of whom are criticial of the company swapping its stock for a small minority stake in a group controlled by the Russian state and of the price that might be paid to satisfy the oligarchs.

The Russian government will want a deal it can present as a success to the public without provoking new allegations of permitting billionaire oligarchs to prosper unfairly – by exploiting natural resources that many Russians believe should belong to all citizens.

Related reading
In depth: Oil
BP-Rosneft: battle of the billions, beyondbrics
Editorial Comment: Oligarchs call BP’s bluff,FT
Dudley faces backlash over Russia, FT