Reflections on Partnership at TNK-BP

Abstract

After the turbulent experiences for overseas companies in Russia during the 1990s and the hiatus in foreign investment activity in the aftermath of the 1998 financial crisis, BP’s decision in early 2003 to take a 50% interest in TNK-BP not only marked a dramatic turning point but also created a company that would become a bell-weather for foreign investors in Russia for the next decade. Officially created in the presence of Russian President Vladimir Putin and UK Prime Minister Tony Blair at a signing ceremony in February 2003, the company instantly became by far the largest example of FDI in Russia, bringing together one of the world’s largest oil companies and a group of Russia’s most influential and assertive entrepreneurs (AAR). Although the new entity they created was often called a joint venture, the main holding vehicle was actually a company based in the British Virgin Islands in which both groups had a 50% shareholding (interestingly against the advice of President Putin, who thought that one side should have control),¹ and so provides an interesting, and very large, example of the corporate structure that we discussed earlier. However, as we shall also discover, although this did help to keep the partners together over a decade of turbulent interaction, local knowledge also played a key role in determining the outcome of a number of disputes.