The landmark share swap and Arctic exploration deal between BP and Russia's state-owned oil company, Rosneft, has been battered by problems ever since it was first announced in January. Now comes another possible crimp in its grand plans. Rosneft chairman Igor Sechin one of the architects of the deal and Russia's deputy prime minister will be removed from his post.
Sechin's removal is good for Russia's image and could quite possibly encourage more foreign investment, which is a priority of both president Dmitry Medvedev and prime minister Vladimir Putin. But it presents a problem for BP, which could use the support and tender loving care of a powerful government insider to save the deal.
The assumption is that the exploration and share swap deal is too valuable for Russia to allow personalities like Sechin to get in the way. And that may be true. But there are political implications that have nothing to do with BP, but could make the deal with Rosneft all the more challenging. In short, removing Sechin from Rosneft comes at an awkward time for a deal that is already under attack by BP's other Russian partner TNK-BP. BP's Russian oligarch partners, who have temporarily blocked the deal, may try to exploit the situation further.
From FT Energy Source:
The deputy prime minister, a former secret service man (like Putin), is seen as the prime minister's most influential ally. A blow to him will be seen in some quarters as a blow against Putin. It will stoke speculation that Medvedev is throwing his weight around in advance of the March 2012 presidential election, bolstering his claims to run again for office instead of stepping aside for Putin.Political wrangling and personalities will complicate things even more so for BP. But in the end, Russia benefits from the deal and will likely push it through. The question is whether BP can successfully maneuver in this politically tricky landscape.
Photo from wikicommons