• English Site
• >Business
• >

  Raid on BP: A Russian Spy Story

Raid on BP A Russian Spy Story

By Jason Bush

Part 2: Strong-Arm Tactics and Paranoia

Many have long suspected TNK-BP would be next on the list, as the Kremlin appears to be systematically reasserting state control over the energy sector. Formed in 2003, when BP invested several billion dollars in the venture, TNK-BP is 50-percent owned by BP and 50-percent owned by a group of Russian investors that includes well-known tycoons Mikhail Fridman and Viktor Vekselberg.

So it may be significant that, under the terms of the original 2003 agreement, the Russian shareholders agreed that they wouldn't sell their part of the venture before the end of 2007. Now that the waiting time has expired, no one will be surprised if the Russian partners sell their stakes to the state. Gazprom has long been rumored to be the likely buyer. If past experience is any guide, strong-arm tactics against TNK-BP could well be a way of encouraging the shareholders to sell -- or lower the asking price.

Looking at Leadership Involvement

Even more alarming for BP is the idea that the British energy giant itself -- and not its Russian partners -- is in fact the primary target. On Mar. 20 the Russian business newspaper RBK Daily cited an anonymous source "close to TNK-BP," who claimed the actual goal of the investigation was to "drive BP from the Russian oil business." Certainly, the subsequent news that two U.S. citizens linked to the British Council have been charged with spying strongly suggests that the FSB's actual beef is with foreigners, and not their local partners. BP declined to comment on Mar. 20.

The big question, of course, is to what extent Russia's top leadership is behind the investigation. The spying scandal comes only weeks after Russia elected Medvedev, who is widely viewed as a relatively progressive and pro-Western figure. Needless to say, the crackdown on TNK-BP, one of the largest foreign investments in the country, isn't exactly the kind of signal investors are hoping to see from the new President, who formally assumes office in early May.

The spying charges also came the day before the Russian Duma was due to pass its new law regulating foreign investments in "strategic sectors" of the Russian economy, especially the sensitive oil and gas sector. Under the new rules, the FSB must be consulted about large-scale foreign investments to ensure that state secrets aren't threatened. The spying allegations at TNK-BP send a chilling message to would-be investors pondering the significance of these new measures.

The behavior of Russia's security agencies often seems to border on paranoia. The FSB's head, Nikolai Patrushev, has frequently warned that foreigners, buried insidiously in innocent-looking nongovernmental organizations, are in fact out to undermine Russia and steal its secrets.

Ongoing Diplomatic Dispute

This also isn't the first time TNK-BP has found itself subject to the FSB's attentions. In 2005, the work of several TNK-BP Siberian subsidiaries was suspended on the orders of the FSB, and in 2006 the FSB opened a criminal investigation into allegations that government officials had leaked "state secrets" to TNK-BP. Under Russian laws, exact data about Russia's oil and gas reserves are deemed state secrets, creating a major headache for managers of TNK-BP, the third-largest oil company in Russia.

But the timing of the new claims, so soon after the presidential election, is certainly suspicious. Perhaps Russia's rulers want to demonstrate decisively to the outside world that Vladimir Putin's replacement by Medvedev doesn't signal any softening in Russia's position on thorny issues. The ongoing diplomatic dispute with Britain began with the assassination of Russian émigré Alexander Litvenenko in 2006 and Russia's refusal to extradite the chief suspect wanted by the British police.

It could well be that Medvedev has nothing to do with what's going on. Many have long suspected he would be little more than a figurehead President -- with the real power residing among the hard-line elements linked to Russia's security services. It surely won't be long before the conspiracy theorists (and in Russia, that usually means everybody) speculate that the crackdown against TNK-BP is in fact part of a wider power struggle between rival factions in the Kremlin.

Certainly, if hard-line factions linked to the FSB want to provoke an embarrassing international scandal at the outset of Medvedev's presidency, they are going about it the right way.

Jason Bush is BusinessWeek's Moscow bureau chief.