Russia's largest oil firm Rosneft threatened on March 25 to seek compensation from the British energy giant BP over a blocked deal to jointly dig for oil in the Arctic.
Deputy Prime Minister Igor Sechin -- chairman of the Rosneft board and a close ally of Vladimir Putin -- said Rosneft would not be deterred from its plans to explore the untapped northern sea riches whoever its partner might be. Sechin's comments suggested that Rosneft was willing to move on if its $16 billion tie-up with BP failed to go though because of the Stockholm arbitration panel ruling.
The Stockholm panel said the deal violated BP executive's shareholder agreement with the Russian partners in their local TNK-BP joint venture. TNK-BP had a right of first refusal on all BP deals in Russia and wanted to take its parent company's place in the Rosneft alliance.
The Russian energy czar had previously warned that Rosneft would seek compensation from either BP or TNK-BP if their internal boardroom struggle ultimately defeated the deal. And he repeated on March 25 that Rosneft planned to "respond in an adequate manner" to the Stockholm panel decision.
"Why only BP?" Sechin told Russian news agencies when asked if Rosneft might now seek damages from the British firm.
"The company will weigh who is at fault for the break-up. There are certain losses there (at Rosneft) already," he added. "In either case, Rosneft intends to defend its position."
Analysts said the billionaires who represent the Russian half of TNK-BP may now either seek tens of billions of dollars as a buyout from BP or otherwise leverage their position as a vital player in the politically-sensitive tie-up.
The unprecedented Rosneft-BP share-swap and Arctic exploration agreement was announced with great fanfare by Putin on January 15. The deal would have handed Rosneft 5% of BP's ordinary voting shares in exchange for approximately 9.5% of the Russian company's stock.
The two firms also agreed to jointly search for oil in Rosneft's three licensed blocks in the Arctic -- a 48,000 square mile region said to contain five billion tons of oil and 3.0 trillion cubic metres of gas.
BP said that it may now return to arbitration in a bid to complete the share swap portion of the Rosneft agreement.
Sechin said he was willing to wait for BP executives and their Russian partner to come to some sort of agreement before deciding how to proceeded. But he stressed that the setback would not alter Rosneft's plans to explore the Arctic no matter whom its partner might be.
"Arctic exploration will continue in any event," Sechin was quoted as saying by Russian news agencies. "BP suits us as a partner, but the current complications should in no way affect our overall plans on Arctic exploration," he said.