BP Shields Itself From Lawsuits in Russian Deal

BP has taken steps to protect itself via indemnities against being dragged in to legal cases swirling around its controversial new Russian partners, Alfa Group and Access-Renova.

Lord Browne, the BP chief executive, spelled out the defensive measures after Mikhail Fridman - chairman of the Alfa Group - was forced to fend off a barrage of media questions about New York and British Virgin Islands court challenges facing Alfa, the main shareholder in TNK whose interests are being merged with those of BP.

Asked about the potential for BP to find itself being financially liable for any historical problems run up by TNK, the British oil executive said: "We have some indemnities that protect us very clearly from past activities."

The two men collectively brushed aside concerns that a row between them four years ago could flare up again, though BP confirmed that any breakdown in relations would be dealt with under English law.

Troubles surrounding Alfa and TNK were raised with the oil magnates as they signed a $6.15bn (£3.8bn) deal under which BP takes a 50% stake in the Russian oil group, to be renamed TNK-BP.

That figure is $600m less than anticipated when the transaction was first announced in March with the difference being accounted for by rising debt levels at TNK, a big oil producer with fields in western Siberia and elsewhere.

The biggest foreign investment in Russia was given the formal blessing of the prime minister, Tony Blair, and Russian president, Vladimir Putin, at an energy conference in London yesterday.

TNK-BP is to be registered in the British Virgin Islands, with Lord Browne saying this location had been chosen because it was the most suitable. "The British taxpayer will not miss out," he insisted.

The reputational risks attached to linking up with TNK and its main shareholders, the Alfa Group and Access-Renova had been considered very thoroughly, Lord Browne said.

He shrugged off differences in the past between himself and Mr Fridman which had seen the British oil group submit to the US state department documents containing a range of allegations about TNK's activities. BP had accused Alfa of unfairly annexing assets in Sidanco.

Four years on, Lord Browne introduced Mr Fridman as "my friend Michael" and insisted they got on famously. "It seems to me we know each other very well."

The Russian for his part suggested there had been "a certain kind of tension" in the past caused by the vagaries of Russian business laws in the early post-communist era. He said he had learned the lessons of the market economy and was in future prepared to follow international standards.

Mr Fridman said the legal cases against Alfa and TNK in New York and the British Virgin Islands would be vigorously defended because they had both financial and reputational implications.

The two sides hope that they can win regulatory approval for TNK-BP later this summer but said they have already been running their Russia businesses together and oil production growth was up 11% this year, faster than expected.