I wonder whether BP (NYSE: BP) really thinks it'll get any relief in Russian courts as the company tries to sustain its important joint venture with three of that country's billionaires. It seems that doing business in Russia is progressively becoming a losing fight for western oil companies. Still, you have to give BP CEO Tony Hayward's folks an "A" for effort in trying to keep the partnership afloat.
War and peace
In a relationship becoming more contentious by the day, BP now is suing its Russian partners in an effort to recover about $370 million in debt related to back taxes from one of the companies the Russian partners put into the venture, TNK-BP, in 2003. (Tax troubles? In Russia? You don't say.)
Last week, in a possibly related action, Russian immigration officials loosened their previous stance and agreed to issue new work permits for about 50 foreign executives working for the company. The list included TNK-BP CEO Robert Dudley, who has been a bone of contention for the Russian trio. Mikhail Fridman, Viktor Vekselberg, and Len Blavatnik have repeatedly sought to have him removed from the venture's helm.
Crime and punishment
As I see it, there are a couple of keys to the contentious relationship between BP and its partners. First, I'm wondering whether any western company will ever be able to get on satisfactorily in Russia, in the face of its expanding resource nationalism. Royal Dutch Shell (NYSE: RDS-A) (NYSE: RDS-B) has suffered a forced sale of its Sakhalin Island assets to quasi-government gas distributor Gazprom, not-so-surprisingly at a distressed price. And even ExxonMobil (NYSE: XOM) is facing increasing difficulty surviving on Sakhalin.
Second, and even more importantly, production from TNK-BP represents a sizable chunk of BP's global output. If BP were forced to sell its assets at a fire-sale price to the likes of Gazprom, the result could be incredibly painful for the London-based company. That's especially true in the wake of a string of misfortunes for BP, including a major Texas refinery explosion, Alaskan pipeline leaks, and an unexpectedly abrupt transition to Hayward at the company's helm.
Were I calling the shots at a western oil company, I'd stay away from Russia. And given the uncertainty of its big Russian venture, as a Foolish investor, I'm inclined to avoid BP shares for now.
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