Streetwise Professor

April 11, 2011

Somehow I Don’t Think Mikhail Fridman Will Need William Shatner’s Help

Filed under: Uncategorized — The Professor @ 7:01 pm

Today it was the WSJ’s turn to run a long piece on the BP-Rosneft-AAR fiasco.  There’s nothing really new here.  But it is interesting to see the Russian spin–spin that makes more plausible the interpretation that BP was played all along..  A few samples:

The Rosneft deal was negotiated personally by Igor Sechin, a key ally of Mr. Putin and chairman of Rosneft, and publicly blessed by Mr. Putin. But when the tycoons complained about the new venture, the Kremlin didn’t shut them down. People close to AAR say they checked every major move against BP with President Dmitry Medvedev and Mr. Putin.

. . . .

A Kremlin spokesman declined to comment, saying the matter was one for the prime minister’s office. Dmitry Peskov, Mr. Putin’s spokesman, confirmed the prime minister discussed AAR’s plans to challenge the deal with Mr. Fridman in late January. “The government has neither the right nor the intention to intervene,” he said.

. . . .

Mr. Sechin had also warned BP’s Russian partners that an agreement was in the works. When Mr. Dudley met Mr. Fridman that evening, the Russian tycoon already knew of the planned meeting with Mr. Putin.

. . . .

Mr. Putin received the BP and Rosneft executives the next day at his official residence outside Moscow. Amid congratulations, he made his warning about the limits of Kremlin control. Mr. Putin’s spokesman said the comment was meant as a general one, not specific to BP’s partners.

So, Sechin is keeping AAR informed of his big deal.  Putin then, and his spokesman now, signal that their hands are tied.

Yeah, right.  The fact is that Putin has myriad levers to pull–if he wants to.  That’s what BP was counting on.  He is deciding, deliberately, purposefully, not to pull them.  It’s not a question of “can’t”: it’s a question of “won’t.”  Why won’t he?  A newfound fondness for contractual rights?  No, seriously.

Don’t buy the story that Putin’s hands are tied.  People should really be trying to figure out why he’s trying so hard to convince the world that’s so.  That’s the real story.  The real mystery.

Meanwhile, the clock is ticking on BP to salvage the deal.  Here, “salvage” means: “pay their reservation price, leaving all the benefit in Russian hands, and crumbs–at best–in its shareholders’ hands.”

BP has until Wednesday to make a deal with AAR.  This reminds me of a story about a former colleague, now passed, sadly.  He’d totaled a car in an accident, and needed to buy a new one stat to take his family on a long planned vacation.  So he walks into the dealer and says: this is the car I want, and I need it by noon today.

Needless to say, he paid sticker.

BP’s Dudley could only wish he’s bargaining with a car salesman.  The whole world knows his bargaining position–or lack thereof.  The only plausible cover he has in dealing with AAR is to claim he can’t take too bad a deal or his shareholders will revolt.  But he and the board are so invested in the Rosneft deal that the credibility of that representation is pretty thin.  So Fridman et al have nearly carte blanche to name their own price. Somehow I don’t think they’ll need William Shatner to provide instructions.

The Journal article reports one BP insider’s take on the situation: “We’re kind of in a predicament.”

You don’t say.  Wow.  I wonder how much that guy gets paid to come up with such blinding insights.

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1 Comment »

  1. I believe it is just a matter of Fridman, Vekselberg, Khan, etc playing the game very well. They have paid every dollar they were told to pay and they have good records of those payments. I guess it is always possible they have something further planned up for BP.

    When something does not make sense it is nearly 100% sure that behind it all is some agreement about money.

    Comment by pahoben — April 11, 2011 @ 8:46 pm

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