Posted by Anne Szustek to FindingDulcinea.com
Russian tax authorities have hammered British oil company BP with fines, court cases and inspections that recall the early days of investing in post-Soviet Russia.
TNK-BP, a joint venture between BP and AAR, a group of four Russian billionaires, is Russia’s second-largest foreign investment to date. With 2007 profits of $5.7 billion, it accounts for about 25 percent of the British oil company’s output.
TNK-BP had been touted since its 2003 launch as a model for foreign investment in what was considered a tough emerging market for outsiders. But over the past year, Russian authorities have launched several investigations and legal injunctions against the oil major more characteristic of what investment in the region was like just after the fall of the Soviet Union.
The Russian investors feel BP is trying to wield too much power, pointing to its large foreign staff. Mikhail Fridman, one of the four Russian investors, claimed in U.K. paper The Guardian that BP regards the joint venture “simply as a vehicle for adding reserves to shore up its own stock price.” BP discounts these arguments, emphasizing the company has had annual growth of 5.8 percent.
After denying work visa renewals to BP staff last week, tax inspectors demanded Monday that BP supply them with employee travel records and time sheets covering 2006 and 2007. If BP does not come up with the information within 10 days, Russian tax authorities are threatening more penalties.
A Monday meeting in Moscow of TNK-BP shareholders voted to keep on CEO Robert Dudley. But, as The Motley Fool’s David Lee Smith wonders, the TNK-BP situation raises the question of “whether any Western company will ever be able to get on satisfactorily in Russia, in the face of its expanding resource nationalism.”
Find out more at FindingDulcinea.com