BP PLC (BP.LN) said Thursday that TNK-BP Ltd. Chief Executive Robert Dudley has temporarily left Russia, saying he was subjected to "harassment" by Russian authorities, prompting the oil giant to threaten legal action against its Russian partners.
The news is the latest escalation in the conflict between BP and its Russian partners Alfa-Access-Renova, or AAR, which each own half of the company. AAR has called for the dismissal of Dudley, saying he only represents BP's interests. Dudley's work visa wasn't renewed by Russian authorities, but he says his work contract is valid.
In a statement, BP Chief Executive Tony Hayward said the company "will use all means at its disposal, both inside and outside of Russia, to defend its interests and rights as a 50% shareholder in TNK-BP." "This will include bringing arbitration proceedings against AAR to recover any and all losses suffered by BP as a result of their violations of the terms of our shareholder agreement," Hayward added. BP has already filed a case in London court against its Russian partners over a tax-issue dispute.
In response to the new legal threat, the Russian shareholders reiterated calls to accept their proposals, which include finding a new CEO to replace Dudley. "The alternative for BP is years of litigation and further deterioration of its position in Russia," AAR CEO Stan Polovets told Dow Jones Newswires."We don't believe AAR has in any way violated the shareholders' agreement. There is no basis for a legal action against AAR," Polovets said.
He said "the best scenario for BP is to accept the AAR proposals," including the nomination of independent directors to the TNK-BP board and tapping a new CEO who would assemble a team without the requirement that they come from either shareholder.
However, BP said in a statement that "Dudley will continue as group CEO...and has all requisite authority to continue to run the company."
In a separate statement, Dudley said: "In the light of the uncertainties surrounding the status of my work visa and the sustained harassment of the company and myself, I have decided to leave and to work outside Russia temporarily." "Despite having a valid employment contract I have been unable to obtain a work visa," he said. In a statement, AAR reiterated its position that "Dudley's employment contract expired in December, 2007, and hasn't been renewed."
"Referring to the Federal Migration Service request to Dudley to provide a valid employment agreement as 'harassment' is deeply inappropriate and insulting," Polovets said in the statement.
"Dudley's insistence on running TNK-BP from BP's headquarters in London is a vivid demonstration of BP's treatment of TNK-BP as its wholly owned subsidiary, the statement said.
BP later said Dudley wouldn't be running TNK-BP out of a BP office while abroad.
BP Chairman Peter Sutherland said: "It saddens me to say that nowhere in our recent history have we been treated as we are currently being treated in Russia where our fellow shareholders - called AAR - have been orchestrating a campaign of harassment in order to gain control of our joint venture TNK-BP." "There has even been manipulation of elements of the Russian state as part of this campaign," he added. "AAR are doing enormous damage to Russia and to globalization."
However, both sides insisted the company's operations aren't paralyzed by the conflict. "The company will continue to operate and trade as normal," BP said.
Polovets confirmed that TNK-BP "continues to work normally" and that he "doesn't see any negative impact from the departure of BP secondees." "The company has performed better since they stopped working at TNK-BP," he said.