Hopes Rise of a Thaw in Relations between BP and Russia ; ANALYSIS

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IT HAS NEVER been easy doing business in Siberia's oil and gas fields. But the biting winds that sweep across the frozen tundra are a minor problem compared with the air of malevolence that wafted towards BP from the Kremlin before new President Dmitry Medvedev took charge on Wednesday.

Under Vladimir Putin, Medvedev's predecessor and great ally, BP had felt the full force of Moscow's opprobrium to their joint venture, the third-largest oil production operation in Russia.

First, Slavneft, BP's Russian joint venture with Gazprom Neft, saw its offices raided in February in an alleged tax probe. Then in March the FSB successor to the KGB raided BP's Russian headquarters. And less than 24 hours later Oxford University- educated Ilya Zalavsky, a senior manager at the firm, was charged with stealing Russian commercial secrets and selling them to Ukraine.

Finally Moscow announced it was sending its environmental chief to probe the biggest field operated by BP in Russia. No-one at BP was unaware that Oleg Mitvol's steely handling of international oil giant Royal Dutch Shell on Sakhalin Island two years ago had effectively forced them to sell up to Russian firm Gazprom.

The attack on BP sent shivers through the market, bringing back uncomfortable memories of the Kremlin's assault on Yukos that led to its dismemberment.

Yukos, once Russia's largest oil company, was sold off in a series of auctions last year following back-tax claims amounting to around [pounds]14 billion.

In effect, Yukos was re-nationalised.

And there were fears before Medvedev came to power that BP may find its assets going the same way, with state gas monopoly Gazprom ready to take over at any time.

Now Medvedev, who is supposedly pro-Western and pro-business, is in charge. The question is, will he continue former President Putin's purge on those who got rich quick in Russia? Or is Putin's work done, and is it time for tempered dialogue with big Western firms? When Putin took control of Russia he faced two challenges: the oligarchs who had seized billions of pounds of Sovietera state assets through the barrels of their Kalashnikovs or mastery of what might loosely be termed the legal system, and the investors often foreign who had piled into the tyranny of post-communist Russia and picked up assets on the cheap like children let loose in a sweetshop.

Putin did two things. With the oligarchs he demanded absolute loyalty. If given, questions would not be asked about exactly how they became rich so quickly, but they would be reined in and be expected to contribute some of their sudden wealth to the motherland. Those that opposed this were jailed, like Mikhail Khodorkovsky, or went into exile, like Boris Berezovsky. …