BP Lies Down With Russia, Gets Up With Fleas

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British oil giant BP would like us all to forget its record oil spill in the Gulf of Mexico last year, a deadly 2005 explosion at its Texas City oil refinery and a major Alaskan oil spill in between–all of them the result of a company that cared more about the bottom line than about how it got there. But, oops, BP is back in the news with some court documents that show the company knew its Russian business partners were crooks but went ahead with a $6.75 billion deal anyway.

From London’s Guardian newspaper:

BP’s attempt to rebuild its public image after the worst oil spill in US history has been dealt a blow by court documents showing it was willing to do a major deal with Russian billionaires whom it regarded as “crooks and thugs” to gain access to the country’s vast oil wealth.

The damaging allegations have come to light at a critical time for BP, which faces a criminal investigation by the US justice department while preparing to fight a massive legal case in New Orleans over the Gulf of Mexico oil spill.

North American rival Norex Petroleum is seeking $1bn damages in its case at the New York supreme court as it argues that BP and its Russian business partner, TNK, have benefited from oil assets that were seized [by TNK] in the late 1990s. Russia is important to BP – its joint-venture, TNK-BP, produces a quarter of its oil. At the heart of the dispute is the alleged misappropriation of the Yugraneft oilfield in Siberia, which Norex claims has generated $1bn in oil revenues in the past decade.

In 2003, BP announced a $6.75bn (£4.2bn) deal to acquire a 50% holding in Tyumen Oil – TNK – which was backed by Alfa Access Renova (AAR), a consortium controlled by four of the country’s richest businessmen, Mikhail Fridman, German Khan, Leonard Blavatnik and Viktor Vekselberg.

Of course, there are precious few businesses that think investing in Russia’s private sector is a safe or good idea, and a new book by a British reporter tells the whole Russian privatization story in its title, “Mafia State.” But for BP, the smell of oil overcame the stench of corruption.

It’ll be interesting to see how BP frames its defense. BP’s lawyers can’t just say that executives knew the Russians were crooks but their need for new oil was greater than their scruples–not while facing a Justice Department criminal investigation that has reportedly reached the the grand jury stage (according to a July 2011 SEC filing by Halliburton)–and could indict individuals as well as the company.

The ongoing criminal investigation and BP’s cavalier corporate scruples in the Russian deal ought to raise some sharp questions in the White House about its decision last month to let BP resume drilling in the Gulf of Mexico–in even deeper waters than the location of the 2010 spill.


Judy Dugan concentrates as an advocate on health care reforms, oil industry issues and telecommunications. She also writes and edits foundation publications and conducts media outreach.

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