labels: Oil & gas
TNK-BP faces Russian tax probe as shareholders vote against ousting CEO news
08 July 2008

Mumbai: Close on the heels of a lost bid by Russian shareholders of BP's joint venture TNK-BP to remove the firm's British chief executive Robert Dudley, Russian tax inspectors today slapped the troubled joint venture with fresh tax demands.

The board of TNK-BP voted against the shareholders' demand to sack Dudley at an emergency meeting. The meeting was called by Viktor Vekselberg, part of the AAR consortium that owns 50 per cent of TNK-BP. A motion requesting BP to nominate a new independent candidate was also rejected.

Robert Dudley CEO BP-TNKRussian shareholders of TNK-BP say that while they hold half the stake in the joint venture, the joint venture is being run from the UK by BP as an extension of the UK firm.

Russian tax authorities have now sought information on a group of foreigners employed or connected with TNK-BP, including time sheets, certification of business trips and passport copies showing foreign travel.

TNK-BP has been asked to submit information on these for a two-year period from January 2006 to December 2007 within 10 days or face penalties.

The fresh probe also comes hours after British prime minister Gordon Brown raised concerns about harassment of the company and its officials with Russian president Dmitry Medvedev on the sidelines of the G8 meeting in Japan.

Medvedev, however, shrugged off Brown's demands, saying he does not intent to interfere in the company's administrative matters. Other G8 leaders are also understood to have spoken to Medvedev on the issue.

BP claims that despite assurances by Russian authorities, there are continued signs that the state continues to use its administrative resources against the joint venture.

The crux of the matter is that BP is not willing to yield ground to its Russian partners who hold an equal stake in the joint venture. TNK-BP's four Russian billionaire shareholders are locked in a battle with BP for control of the joint venture oil company.

TNK-BP, Russia's second-biggest foreign investment, generates about 25 per cent of BP's oil production worldwide and as much oil as UK produces.

The Russian shareholders claim that the British-American CEO shows favouritism to British employees and want to drastically cut the number of foreigners directly employed by, or seconded to, TNK-BP.

They also say the foreign employees are too expensive for the joint venture  and are not really required in such large numbers.

BP's top management, on the other hand wants the Russian government to guarantee that state security services and tax investigators are not used against TNK-BP. The management sees these as a concerted move by the authorities and the local shareholders against TNK-BP.

The joint venture, which made a profit of $5.7 billion last year, has paid $18 billion in dividends since its inception in 2003. Russian shareholders blame CEO Dudley for the firm's ''poor performance.''

Sources close to BP say the Russian shareholders simply want to oust Dudley in order to seize control of the venture.

The BP  side is also demanding the removal of two of the Russian billionaire partners from their management posts at TNK-BP.

The two sides are due to meet this week-end in Cyprus for a board meeting of the firm's parent, TNK-BP International.

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TNK-BP faces Russian tax probe as shareholders vote against ousting CEO