Russia: TNK tussle

Tuesday could be another difficult day for embattled TNK-BP CEO Robert Dudley.  The visa that allows him to work in Russia is set to expire on July 29, and it is unclear whether authorities will grant him an extension.  Dudley is currently allowed to stay in Russia under a ten-day transit visa, a stopgap measure granted after authorities claimed he had failed to submit a proper employment contract.  Customs officials now assert that Dudley’s contract is not a valid document, the latest in a string of legalistic and bureaucratic quandaries facing the joint venture.

The importance of the dispute cannot be understated: at stake is the very future of TNK-BP, the third largest oil company in Russia, and one of few (formerly) successful multinational joint ventures.  The company’s Russian shareholders -- among the richest businessmen in the country -- are seeking greater control over TNK-BP’s assets and strategic direction.  They accuse Dudley of failing to represent their interests and of misusing company finances; in some ways, Dudley has become a scapegoat for the larger managerial challenges the company must face. 

Current and potential foreign investors regard TNK-BP as a bellwether for Russia’s overall investment climate.  Of concern is the Russian government’s increasingly active role in a number of industries deemed central to national strategic interests -- above all, the energy sector.  However, the Kremlin has consistently sought to distance itself from the TNK-BP fiasco.  By doing so, it has allowed the TNK-BP dispute to remain in the private domain, which could reassure investors concerned by excess government interference.  On the other hand, it is virtually impossible that the dispute will be resolved without outside intervention -- and the longer the struggle drags on, the more Russia’s reputation could be sullied by corporate infighting.