AAR files injunction against BP/Rosneft deal

TNK-BP's Russian parent files suit against BP in London hoping to block the British oil major's deal with Rosneft. Is it looking for a way out?

AAR filed an injunction at London's High Court on Wednesday, in an apparent bid to scupper BP's $16 billion share swap and Arctic co-operation deal with Rosneft. However, it's also possible that the company's legal challenge is actually preparation for an exit from TNK-BP. 

The Russian partner in TNK-BP has been making disgruntled noises about the BP-Rosneft tie up ever since it was announced on Jan. 14, referring to a TNK-BP shareholder agreement that it says requires BP to pursue all projects in Russia and Ukraine exclusively through the joint-venture.

Taken at face value, the legal suit suggests AAR wants to have the chance to check on BP's projects with Rosneft ahead of their start, with an option to join. However, that's unlikely to happen for a number of reasons. In the first place, TNK-BP is in no position to force its presence upon state-controlled Rosneft. At the same time, the Kremlin is unlikely to welcome disruption to its landmark deal, especially while it is busy boasting about it as part of a hard sell to foreign investors in Davos. That BP's share price retreated in London on the back of the news is not likely to cheer the powers that be. Further than that, in reality it's unlikely that the large-scale, challenging off-shore projects planned by the BP-Rosneft partnership would interest AAR shareholders, who are used to swift returns. 

One possible motivation for the move then is that AAR is preparing the ground to leave TNK-BP, because it sees its days are numbered.  TNK-BP has been a bumpy ride for BP, which lost a well-publicised spat with AAR in 2008 over the strategy for international expansion - one that saw Bob Dudley, now BP CEO, lose his Russian visa. Rumors that one of the partners may sell have been doing the rounds for years, but given that the joint venture constitutes around 20 percent of BP's current reserves - and has also been extremely profitable - the British company is unlikely to favor that route. However, now that BP is in bed with the Kremlin, AAR is in the weaker position. Envisaging an eventual exit anyway, it may be already starting a campaign to lever the highest price possible.

As Alexei Kokin of Uralsib suggested this week: "It may not be imminent, but I guess that AAR will be thinking that if it's to be decided that they should be out of the way eventually, then they need to secure the maximum possible price. I wouldn't be surprised if they were to revert to their old habits to provoke a deal."

A BP spokesperson confirmed to media on Thursday no more than that the injunction had been filed, adding only that the company is honoring all its commitments to its partners in TNK-BP. An initial hearing for the suit is set for Feb. 1, reports the Financial Times. Stan Polovets, chief executive of AAR, declined to comment on Thursday.

Meanwhile, the heads of both BP and Rosneft exhibited little concern over the news. The main jist of comments from Bob Dudley on Thursday was that BP envisages a division of labor in Russia, with TNK-BP carrying out land-based projects and BP/Rosneft handling off-shore. 

However, it's the hawkish head of Rosneft and deputy PM Igor Sechin - busy beaming as he signed off on another landmark deal for the state-controlled oil major, this time with Exxon Mobil - that will have the last word. 

"We consulted with BP and it is their opinion that they acted in line with the law," he said. "We don't see a problem here," he added, before labeling the issue a "misunderstanding." He didn't explain which party had the wrong idea.

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