On Tuesday, BP announced it had not received promised work permits for 71 employees at its TNK-BP joint venture, including ones for Robert Dudley, chief executive of the venture. (David Moir/Reuters) [Enlarge this image]

Visa troubles could cost BP control of Russian venture

By Andrew E. Kramer

Published: July 1, 2008

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MOSCOW: In another sign of Russia's souring relationship with Western oil companies, the foreign staff of BP's joint venture in Russia, including the chief executive, will be required to leave the country this month, some of them permanently, because their work permits were not renewed.

The departures come as BP, based in London, is struggling to maintain control over the lucrative venture, TNK-BP, which accounts for about a quarter of BP's global oil output but which is unraveling under pressure from its Russian partners and the Russian government.

In a statement, BP cautioned that the management turmoil might harm operations, and perhaps oil output.

Still, it is unclear how seriously this latest regulatory assault on TNK-BP could shake the company, or what would happen to it during the perhaps weeklong pause as foreign employees are outside Russia's borders.

The departure of top BP officials from the venture would leave operations in the hands of the Russian partners, who have been struggling for greater control.

The TKN-BP chief executive, Robert Dudley, and about 50 others would be departing temporarily while work permits are processed, BP said. About 50 other foreign employees would be barred from returning after their current visas expire because Russian authorities reduced the quota for foreign workers at the joint venture.

TNK-BP has asked for a review of these decisions, a company spokeswoman said.

"We have been working with the Russian authorities and within Russian laws since April to resolve this issue, and will continue to do so," Dudley said in a statement, referring to the renewal of work permits. "However, we have been given no grounds to believe these issues will be resolved before senior international staff and their families will have to leave Russia."

BP owns 50 percent of the venture, with the remainder held by four Russian billionaires. It is the only major oil company in Russia partly controlled by foreigners. TNK-BP has been extremely profitable, reporting annual revenue for 2007 of $24.9 billion and net profit of $5.7 billion.

TNK-BP was formed in August 2003 from the assets of TNK, Onako, Sidanco and most of BP's Russian assets. At the time, the Russian government was taking a less nationalistic stance to its petroleum industry. BP has since come under pressure from both the state and its private sector partners to reduce its equity stake to a minority position.

In examples of pressure faced by TNK-BP this year, the FSB, the successor agency to the KGB, arrested a Russian national employee and accused him of industrial espionage; FSB agents have raided the headquarters; and environmental authorities questioned operations at a large Siberian field.

And already once this year, labor officials reduced the foreign staff by barring 148 foreign employees of BP from working at the TNK-BP venture, saying their work permits were for BP only.

At the same time, the Russian partners are suing in a Siberian court to declare the BP-controlled board of a key subsidiary illegitimate, further restricting BP's ability to manage its investment here.

In May, one of the Russian equity partners, German Khan, who is also a deputy director, submitted a request to the Moscow City Employment Service for a quota for foreign employees. His request was far below the number of foreigners working at the company.

A month later, Dudley, the chief executive, submitted a longer list and said Khan was not authorized to sign the paperwork on the previous request, according to Andrey Grinberg, a spokesman for the employment service.

Grinberg said Khan's request arrived first and was never formally withdrawn, and for those reasons it was processed in place of the request from the chief executive, Dudley. "It's all clear from our side," he said.

He said employees would be required to leave the country as their visas expired; the company had traditionally renewed visas in July.

The city approved 71 work permits; because some were duplicated for positions where turnover was expected through the year, the permits correspond to about 50 positions, according to BP. Marina Dracheva, a spokeswoman for TNK-BP, said an appeal was scheduled for July 7.