The NYT business section ran
a fairly long article on the BP-Rosneft
. As a Russian noted in a comment to my earlier post on the
subject, the Times piece supports my argument that BP (
) was counting on Russian lawlessness to overcome the
black-and-white of its agreement with its AAR Russian
This time, it had appeared that Mr. Dudley and BP might have
protection from higher-ups. Rosneft's chairman, Igor I. Sechin,
is also a powerful deputy prime minister.
A senior BP official with knowledge of the company's work in
Russia said BP lawyers had understood that the agreement with
Rosneft (RNFTF.PK) was "on the edge" of violating the TNK-BP
shareholder agreement. But the deal also appeared to coincide
so strongly with Russia's national interest that the company
assumed the Kremlin would discourage the Russian shareholders
in TNK-BP from making trouble. [Translation:
"discourage"="Threaten with adjoining cells in Chita."] The BP
official spoke on the condition of anonymity because he was not
authorized to talk on the record.
The article contains this howler:
Mr. Putin, too, now seems to be distancing himself from the
BP-Rosneft deal. In March, he told Russian journalists at a
news conference that Mr. Dudley had not warned him of the
possible legal challenge from the Russian oligarchs.
"I was completely in the dark," he said, according to the
newspaper Vedemosti. "When I met with BP's director he didn't
say a word about this," Mr. Putin said, referring to Mr.
I am sure that Mr. Dudley also didn't say a word about the sun
rising in the east, the color of the sky, or Joe Biden's hair
plugs: one needn't waste time by belaboring the universally
known. The shareholder's agreement wasn't a secret. And even if
it had been a secret from the wider world, do you think for a
moment that Putin, ex-spook and head of a government lousy with
current and ex-spooks wouldn't have known about an important fact
in the most important industry in Russia? In the dark? As if.
I still think there is a substantial likelihood that BP was
played from the beginning, that Sechin/Putin and the AAR
oligarchs have been tag-teaming. But even if that's not the case,
it is impossible to know what the true story is, and what its
The BP-Rosneft deal also inspired (if that's the word)
the most ludicrous thing I've read in a long
Russia Investors Should Study Kremlinology
Kremlinology was once the speciality of spies and diplomats:
These days, foreign investors and companies need a degree in it
too. Oil major BP had expected Russian political influence
would secure its $16 billion share swap deal with state-owned
Rosneft. Instead, its oligarch-backed opponent, Alfa Access
Renova, has successfully blocked the plans: Arbitrators
confirmed an injunction on the deal on Friday. But could bad
news for BP encourage others investing in Russia?
Kremlinology was almost always a farcical failure at its
heyday. And BP's current predicament is attributable precisely to
its attempts to practice Kremlinology. It was too clever by half
in its belief that it could unwrap the riddle inside the mystery
inside the enigma, and that it could play power politics in
Russia. It completely outsmarted itself. If you believe you
really know what's going on there-then you're the mark. That's
all the Kremlinology you need to know.
The WSJ article argues gamely:
Both AAR's legal victory, and the move against ministers'
corporate influence, fit a theme reformers want to promote:
That Russia's investment climate is improving.
It is still far too early to draw any conclusions about the
outcome of the AAR-BP-Rosneft affair. And the broader
implications of that affair are even more uncertain. Even if this
does represent a case in which the Russian state respected
investor rights, even though it would have preferred to do
otherwise, who is to say that this is a precedent, rather than a
one-off? Perhaps the internal politics cut one way this time: Who
is to say they will cut the same way next time? If Putin is
backing off now because he needs the money (which the WSJ
suggests), how will he behave when his needs are less pressing?
The whole thing about Russia is that there are no-zero, zip,
nada-ways of making and keeping credible commitments. Everything
is driven by the particulars of the parties and the moment.
That's what you need to know about Russia: Anyone who thinks that
he can use Kremlinology to understand even approximately those
particulars, and how they are likely to shift, is in for a rude
surprise. As an alternative, I'd suggest reading entrails. It's
far more reliable.
The "move against ministers' corporate influence" is even more
difficult to interpret. Yes, on its face, it is encouraging. But
relying on superficial readings is very dangerous when it comes
to Russian politics. Is it a desperate gambit on Medvedev's part?
What are its odds of succeeding? Is this just part of a mechanism
to redistribute the goodies? To cut down to size some people who
have gotten too big for their britches and pose a threat to
Putin-at least from his paranoid perspective (paranoia being a
highly valuable trait among autocrats)? (Firing everybody to get
rid of one somebody is not unknown, even in the U.S.: cf. the
Clinton DOJ's firing of all U.S. attorneys to get rid of a
particularly meddlesome one in Arkansas.) The opening salvo in a
power struggle? (In which case, run, don't walk, to the nearest
exit.) Even if it is legit, how likely is it to succeed? Will it
really transform in a fundamental way the political and business
system in Russia?
Fools rush in where angels fear to tread. Rushing into Russia
on the basis of a few ambiguous developments which could
possibly, maybe, be interpreted as the harbingers of a new
investment environment would be quite foolish indeed.
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