Rosneft and BP: oil, money and foreigners

Energy & Commodities
  • Last week’s announcement that Rosneft would agree to buy BP’s stake in its TNK-BP joint venture will almost certainly be the Russian deal of the year.  The tie-up sharply increases the stake of the Russian state in the Russian oil industry and scale of BP’s partnership with the Russian system.  Like any deal that brings together oil, money, the Russian government and foreigners it offers a snapshot of contemporary Russian energy politics.
  • For BP, the deal is a carefully calculated strategic gamble. The potential rewards of proximity to the Russian government, including future access to attractive Arctic fields, are substantial. However BP is also potentially doubling down on some of the trickiest political Russian aspects of their TNK deal.
  • For the warring instincts in Russian energy politics, the BP-Rosneft deal looks like an attempt at a new modus vivendi, although one that is skewed in favour of the Kremlin and its allies. BP provides the foreign capital and expertise. The Russian state bolsters its grip on the sector with a counterbalancing co-investment.  
  • The deal clearly has President Putin’s stamp, but interpreting Putin’s motives is more complicated than it might seem. The move is part of Putin’s political balancing of his own instincts, his reading of Russian politics and the factions around him.

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