BP's rivals shift in Russian tussle

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Raided by security services, its board paralysed, key technical experts barred from working and deluged with court cases and labour inspections, TNK-BP is a struggling $38 billion (19 billion pound) oil company producing as much crude as Britain.

As investors scrutinise the saga to read the runes for future projects in Russia, signs are multiplying that the root of the dispute may not be in the Kremlin but rather the boardrooms of Russian billionaires. Even that is uncertain.

TNK-BP, a highly lucrative 50-50 joint venture between BP and four Russian-connected billionaires, began in 2003 amid much fanfare in a deal blessed by then-president Vladimir Putin. It produces a quarter of BP's global oil output and posted a net profit of $5.7 billion last year.

TNK-BP's first five years were a success story. Former BP managers working at the venture talk with pride of how they improved management of oilfields using the latest technology, cut back leaks, and boosted operating efficiency.

But its ownership structure, which gives management control to a foreign oil major, became an anachronism following a Kremlin-led drive from 2003 which took back under the state's wing control of all big Russian energy assets.

So when a campaign against TNK-BP suddenly started this year involving tax police, alleged labour code violations, security service sweeps and court cases, many assumed the Kremlin was pressuring the firm to accept a state partner.

A similar barrage of official harassment was unleashed in 2006 against Royal Dutch Shell to force it to sell a controlling stake in its giant Sakhalin gas venture to Russia's state-dominated energy champion Gazprom.

This looked like a replay, but there have been repeated statements from officials, including President Dmitry Medvedev, that the state does not want a stake.

"Something has changed in the past few months... The government has changed. Players have moved around. Power is more dispersed," said a source close to BP, speaking on condition of anonymity like most in this case because of its sensitivity.

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