BP Ups Stakes By Accusing Putin of Failing to Stop Hijack By Oligarchs

BP has upped the stakes in its battle for control of its Russian joint venture, by accusing Vladimir Putin of damaging his country's reputation through failing to intervene in the escalating dispute.

Peter Sutherland, the BP chairman, used a press conference in Stockholm to lament the prime minister's lack of action to halt oligarchs using strong-arm tactics to try to take control of TNK-BP.

"This is just a return to the corporate raiding activities that were prevalent in Russia in the 1990s. Prime minister Putin has referred to these tactics as relics of the 1990s, but unfortunately our partners continue to use them," Sutherland said.

"The leaders of the country seem unwilling or unable to step in and stop them. This is bad for us, bad for the company, and, of course, very bad for Russia," he added.

Sutherland said the dispute between BP, which owns 50% of TNK-BP, and the oligarchs who own the other half, was about control, and possibly even ownership, of Russia's third-largest oil producer, rather than the operational matters of which the Russians have complained.

Tony Hayward, the BP chief executive, had been much more discreet when questioned 24 hours earlier about the row at a launch of a statistical review, saying the two sides remained in talks - although he admitted he was not expecting "an early resolution of a complicated issue".

Sutherland, a former EU commissioner with a formidable reputation as a political battler, threw caution to the wind by dragging in the Russian leadership. On Wednesday he had dismissed speculation by Kremlin-controlled Gazprom that oil prices could almost double to $250 per barrel as "apocalyptic".

That same day the quartet of billionaires - Mikhail Friedman and German Khan of the Alfa Group, Viktor Vekselberg, and Len Blavatnik - said they would sue the British company after it rejected their demands for more boardroom positions and influence.

They plan legal challenges in the international arbitration court in Stockholm, and in Russia. They have criticized governance at TNK-BP, which is headed by a former BP executive, Robert Dudley and have also claimed that BP had tried to buy them out.

Sources close to BP say that, on the contrary, the oligarchs themselves approached the British group, asking whether it would

consider buying out their half share. BP apparently agreed it would do so, but only if it could arrange an immediate deal to pass it on to Gazprom or another state-owned entity - a manoeuvre which was rejected by the oligarchs because it would diminish the potential price.

Both the oligarchs and BP executives seem convinced that the Kremlin is determined to continue its policies of "resource nationalism", and will at some stage make a bid to take control of TNK-BP.

TNK-BP was the largest foreign investment in Russia when set up in 2003. It is vital to BP because it accounts for a quarter of its worldwide output, and 20% of reserves. The treatment of BP is seen as a bellwether of Kremlin attitudes to foreign investors, following the effective seizure of assets from Shell at Sakhalin after a long period of destabilization.

· This article was amended on Tuesday June 17 2008. The chairman of BP is Peter Sutherland, not John Sutherland. This has been corrected.