Russia: investor climate so bad BP row can’t hurt

* BP row won’t affect investment climate – Kremlin aide

* Kremlin hopeful dispute will be settled

By Denis Dyomkin

MOSCOW, March 29 (Reuters) – Russia’s investment climate is
already so bad that even a row between BP and its shareholders
at Anglo-Russian TNK-BP will not discourage seasoned investors,
a senior Kremlin aide said on Tuesday.

BP (BP.L: Quote, Profile, Research) was blocked from expanding its presence in Russia
through a $16 billion share swap and joint exploration plans
with Russian state giant Rosneft (ROSN.MM: Quote, Profile, Research) by a Stockholm
arbitration panel last week, after TNK-BP’s (TNBP.MM: Quote, Profile, Research)
billionaire partners took the case to court.

The move has led to concerns that other energy firms looking
to extend their reach may face similar problems.

“Right now our investment climate is so bad that it won’t be
affected,” President Dmitry Medvedev’s top economic aide, Arkady
Dvorkovich, told reporters.

He said he was hopeful that the dispute would be settled,
and when asked what the Kremlin’s advice was, Dvorkovich
responded: “Find a solution that is acceptable to both sides. I
think they’ll find one.”

Medvedev said in December Russia’s investment climate was
poor and has called for a reduction in bureaucracy, an
improvement of the court system and for property rights to be

Dvorkovich has said the sentencing of former oil tycoon
Mikhail Khodorkovsky to six more years in prison could hurt
Russia’s investment climate.

Russia’s image was dented late last year when a court ruled
against Khodorkovsky, in jail since 2003, after what his
supporters said was a politically motivated trial into theft and
money-laundering. The United States criticised the decision.

The case was seen as a test of Russia’s commitment to the
rule of law, which along with corruption is seen as one of the
biggest problems investors cite when doing business in Russia.

Russia is perceived as the most corrupt country in the G20
by Transparency International, which places it on a par with
Cambodia and Kenya.


BP’s attempt to form an alliance with state-controlled
Rosneft to explore the Arctic was seen as a major boost for
Russia’s investment climate before it was challenged by the
local shareholders of BP’s joint venture TNK-BP.

Rosneft Chairman Igor Sechin has argued that Rosneft had
suffered losses as a result of the actions by BP’s TNK-BP
partners Access-Renova (AAR), which pursued the court action
against the BP-Rosneft tie-up, arguing the alliance violated
their right of refusal.

BP has sought further court hearings on its blocked Rosneft
deal on April 4, AAR said. AAR and BP each own half of TNK-BP.

The dispute has also dealt a blow to the government, which
struck a series of deals this year with global energy majors to
tap new oil and gas regions to sustain long-term output growth.
Analysts have said these majors could now quit Russia.

Top oil producer Russia is trying to polish its image for
foreign investors, not only in the energy sector where it is
trying to offset an imminent decline in output at its western
Siberian oil fields.

Medvedev has embarked on a modernisation drive aimed at
diversifying the oil and gas-driven $1.3 trillion economy
towards high-tech innovation.
(Writing by Thomas Grove; editing by Elizabeth Piper)

Russia: investor climate so bad BP row can’t hurt