PLATFORM Unravelling the CarbonWeb
Sign up to our mailing list
 
Read the latest newsletter

Unravelling the Carbon Web is a project by PLATFORM. We work to reduce the environmental and social impacts of oil corporations, to help citizens gain a say in decisions that affect them, and to support the transition to a more sustainable energy economy.

SEE ALSO
Corporate Europe Observatory

The Eurocrats go bear-baiting - the EU & TNK-BP

As BP and its rival shareholders in Russian oil company TNK-BP have sparred for control of the company, both sides have pulled in powerful state actors as back-up over the last six months. With the oligarchs counting on support from the Russian Intelligence Agency, BP countered by drafting in not only British ministers but European Union officialdom as well.

BP's role in successfully influencing policy decisions to its own ends in Westminster is widely accepted, but there is less awareness of how the company operates in the murky world of Brussels-based lobbying. Thus, CarbonWeb is running an edited excerpt from an upcoming report by Corporate Europe Observatory that explores how BP mobilises EU support for its own interests.

*

Russia holds the world`s largest natural gas reserves, and is the second largest oil exporter. The 1991 collapse of the Soviet Union offered BP the opportunity to access Russia’s reserves for the first time. John Browne, who was BP Chief Executive at the time, relished the prospect, believing that Russia “rivals any other potential opportunity available anywhere in the world”. By 2003, BP had made the largest foreign investment in Russia since 1917. TNK-BP was registered as a joint venture, with 50% of the company owned and controlled by BP and the other half under the control of Alfa-Access-Renova (AAR), a group of four Russian oligarchs.

From the outset the joint venture has been marred with problems and BP has clashed repeatedly with the Russian state. In 2007, TNK-BP returned control of its Kovykta gas-field, following accusations that the company was falling short of production figures set down in its licence.

The troubles came to a dramatic head throughout 2008. In March the FSB (the Russian Intelligence Agency) raided TNK-BP`s Moscow offices and charged an employee with spying. Less than a week later, BP was forced to suspend 148 foreign staff seconded to TNK-BP because of visa complications. May saw the offices raided by the FSB for the second time in three months, while BP faced a lawsuit from an unknown Siberian company. In June Bob Dudley, the TNK-BP President, was questioned for five hours by the Interior Ministry as part of an investigation into tax irregularities at TNK.

At this point the EU began to publicly pressure Russia, with a series of high level pronouncements condemning the treatment of BP.

Visiting Moscow, European Trade Commissioner Peter Mandelson criticised the Russian state, “I regret very much any instance, for example in the case of TNK-BP, where tempers seem to have flared ... What this is doing is creating a bad image [of Russia] ... it goes all the way around the world.” Mandelson called for a “grand energy bargain” between the EU and Russia and said that the TNK-BP dispute “has got to be resolved speedily.” Speaking at an EU-Russia summit that same month, the EU External Affairs Commissioner, Benita Ferrero-Waldner, raised the issue directly with the Russian government as a matter of investor confidence in Russia.

Mandelson in an interview told the Russian government to “step back” and allow the investors to resolve their differences. President Medvedev fired back that the state should not interfere in corporate conflicts and criticised those shareholders who expected to have disputes resolved with the help of the state.

Why would EU Commissioners intervene on behalf of a private company like BP? The EU has supported BP`s moves into Russia over an extended period – the recent intervention was not a one-off gesture of support. While BP and Shell were buying their way into Russian oil and gas reserves, the European Union was simultaneously setting its sights on Russia as a major energy source, to the point where it was providing over 40% of the EU`s gas needs by 2006.

BP lobbying and positioning has helped persuade EU officials that the interests of the EU are aligned with those of the company. While he was still Chief Executive of BP, Lord Browne admitted that the company used government support to “underpin” business. To generate this government support on an EU level, the company has penetrated various Brussels-based advisory groups and quangos, achieving significant levels of influence within Brussels.

Howard Chase, BP’s Head of European Affairs, sits as the Chairman of the Industry Advisory Panel in the Energy Charter Secretariat, a Brussels-based body that seeks to ensure free trade, transit and investment in the energy sector in the Former Soviet Union, protecting the interests of foreign energy investors.

This same Howard Chase is also the convenor of the Foreign Economic Relations group at the European Roundtable of Industrialists – self-described as “one of the most influential pressure groups around”. BP Chairman Peter Sutherland chairs this working group, whose work “is based on the premise that open international flows of trade, investment and expertise are a critical component of European competitiveness.” A recent paper by the group argued that Russian policy-makers “can best strengthen investors' confidence by taking measures that strengthen the perception that investments are safe and can be put to the most productive use.”

While documents showing the full extent of BP’s penetration of EU institutions are unavailable – the best lobbying always remains secret - the company appears to have succeeded in using the EU’s political muscle to defend its interests in Russia. The resolution of energy security issues in the EU depends on greater energy independence and in economic restructuring based on renewable energy. However, BP’s efforts have instead led the EU to take action in the opposite direction, prioritising support for the oil company’s attempts to replace its depleting reserves with Russian gas and oil.

This article is an edited case study from a forthcoming Corporate Europe Observatory (CEO) report on BP's lobbying in Brussels prepared by CEO and PLATFORM.