Why Is This Man Smiling?

BP's Hayward has found a way to bail out the company in Russia--to his personal profit as well

2 min read
Why Is This Man Smiling?

Earlier this year we reminded readers that Robert Dudley, the man brought in to salvage BP, once got into such a tiff with Russians, he felt compelled to retreat to a secret location to run the company's joint venture in Russia, TNK-BP. So how is it that Wednesday's New York Times carried a photograph of the supposedly disgraced and deposed Tony Hayward, in Russia, beaming at Russia's top oil official?

"Russian companies are talking to BP about buying billions of dollars in oil fields and other assets to help it pay its gulf cleanup and compensation costs," the Times explained. "Along with a partner, BP is planning to explore the rich oil fields in Russia’s Arctic waters, a region that is off limits in the United States and Canada. And BP’s chief executive, Tony Hayward, who is turning over the reins this Friday to Robert Dudley [the former head of TNK-BP] is being welcomed onto the board of TNK-BP, the company’s 50-50 joint venture in Russia."

So Dudley and Hayward are trading places, in a manner of speaking. The basis of this startling switch, according to the Times, is that Hayward managed to mend fences with the Russians after Dudley's ouster, laying the foundation for future joint work. Now that BP desperately needs to sell assets and develop new projects to cover its huge Gulf oil spill liabilities, the Putin-Medvedev government is offering a helping hand.

When the spill occurred, the Russians resisted the temptation to "kick a man when he's down," as a source put it to the Times, and now are hoping to reap their rewards in terms of bargain acquisitions, technology transfer, and assistance breaking into foreign markets. Particularly valuable to them, reportedly, was a commitment they obtained from Hayward: Under a 2007 memo of understanding negotiated with Hayward, "BP offered to help Gazprom make an acquisition outside of Russia. It was no small undertaking, as at the time Western governments were hesitant to see the already powerful Russian energy giant go global. In exchange for this politically delicate task, BP would get help from Gazprom with its vitally important business inside Russia."

BP and TNK-BP declined to tell the Times how much Hayward will make as a TNK-BP director. Perhaps his compensation will depend on whether he and BP now deliver on that 2007 understanding. As for Dudley, who took the wheel at BP's helm earlier this week, he is moving aggressively to reform the company's safety culture and the way it deals with subcontractors.

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