BP’s botched Arctic deal and the extent of the Foreign Office’s support

28 Mar 2011 admin

An article on the front page of the Business Section of the Telegraph today has used Freedom of Information requests obtained by PLATFORM to show how BP has used the Foreign Office to cement a controversial deal in Russia, even when the legality of the deal was in doubt. A Channel 4 Dispatches episode this evening by investigative journalist Greg Palast will be examining the relationship between the oil company and the UK government in even more detail. James Marriott of PLATFORM reports.

Bob Dudley’s attempt to relaunch BP after the nightmare of Deepwater Horizon was pegged on a bold move into the Russian Arctic. The announcement of the Arctic deal on January 14th certainly achieved the media coverage desired and helped push the share price up to its highest level since the drilling rig exploded in the Gulf of Mexico nearly nine months before.

However just nine weeks later the share value was falling again as investors absorbed the news that the Russian company AAR might severely derail the planned BP-Rosneft deal and thereby block Dudley’s strategy. Serious questions are now being asked about the judgement of Dudley’s team. For BP either knew that the deal with Rosneft was in breach of their legal agreement with BP-TNK and chose to ignore it, or they did not know and were therefore negligent.

Most likely Dudley’s team knew that there were risks and aimed to minimise them by publicly emphasizing Prime Minister Vladimir Putin’s support for the deal – it was widely trailed that Dudley had hurried to the press signing of the agreement in London directly from a meeting with Putin’s Novo-Ogaryovo residence.

BP also tried to bolster the deal by pulling in UK government support. With just three days notice they requested that either Deputy Prime Minister Nick Clegg or Energy & Climate Change Minister Chris Huhne attend the signing in BP’s Head Office in London.

Clearly the Dudley team used ministerial support to bolster the deal. They might have hoped that AAR would refrain from contesting the agreement because of Putin’s clear support and the UK ministerial support was used to strengthen BP’s hand by emphasizing that it is a matter of international relations.

The ability of BP to use the UK government in this way depends on the Foreign Office and related departments having a long and often unquestioning support for major oil companies such as BP and Shell. This relationship is clearly demonstrated by the 18 months of interchange between the UK’s Ambassador in Moscow, Anne Pringle, and BP over their plans to tie up with Rosneft.

It also depends upon the cultural acceptance of this kind of relationship across Whitehall and Westminster, as illustrated by the shocking paucity of debate around UK oil companies’ advances into the Arctic region. This failure of scrutiny is well highlighted in PLATFORM’s new report Arctic Anxiety.

Energy Minister Charles Hendry called the BP Rosneft deal a ‘purely commercial matter’ in the days after the signing, however the subsequent unravelling of the deal illustrates how BP utilised the UK government to bolster a highly questionable ‘commercial’ manouever. As the report requests there should be far more public scrutiny over matters where what is in BP’s interests are automatically assumed to the same as what is in the UK’s interest.

The FOI requests can be downloaded here, and you can view a one minute video on the Arctic Anxiety report here.

Below is a short online presentation of the findings of the report.

Arctic Anxiety on Prezi

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