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Thursday, March 20, 2008

Russian security aims a blow at British oil company

March 20, 2008 - International Herald Tribune by Andrew E. Kramer - MOSCOW: Russian security services detained an employee of BP's Russian joint venture and are accusing that man and his brother of industrial espionage, according to a statement released Thursday by the FSB, the main successor agency to the KGB. The arrest of the brothers bodes ill for BP's work here and is quite likely also to send a chill through the community of Russian employees at Western companies, particularly those out of favor, as BP has been. Ilya and Aleksandr Saslavsky, well-known in the foreign business community, were Russians who both held U.S. citizenship. Both were graduates of Oxford University and active in alumni organizations. The brothers detention came a day after raids on the offices of BP and the joint venture company, TNK-BP, which BP owns together with three Russian oligarchs. It is the only major Russian oil company with partial foreign control, other than a production sharing agreement including Exxon Mobil on Sakhalin Island. TNK-BP was formed in 2003 with the blessings of President Vladimir Putin and Tony Blair, then the British prime minister, who attended the signing ceremony. Since then, as oil prices have risen far beyond expectations, Putin's government has attempted to unwind such deals as unfavorable to Russia. The venture, though, has been a great success for the British oil major and accounts for about a quarter of the company's total worldwide production. It is a focus of attention by Tony Hayward, BP's chief executive; any unwinding of TNK-BP could be devastating to BP. The joint venture, though, was under pressure to sell a large Siberian gas field to Gazprom. It had agreed to a deal but never closed on it. Also, the Kremlin may be maneuvering to buy out BP's partners from the company that is Russia's third-largest, analysts have suggested, though the partners say they are not selling. A TNK-BP spokeswoman declined to comment Thursday on the arrests. Ilya Saslavsky worked at TNK-BP. The other brother, Aleksandr, had worked "as an energy consultant in New York and Moscow," according to a biography he sent by e-mail to alumni of British universities while running for president of the British Alumni Association last year. It did not specify his employer. From 2000 until 2003, a man by that name worked at Eurasia Group, a global risk assessment company, according to Alexsandra Lloyd, a spokeswoman. Russian security services laid out their case in a statement. "The brothers were illegally collecting classified commercial information for a number of foreign hydrocarbon companies that wished to have advantages over their Russian rivals," the FSB said in the statement carried by Russian news agencies. It said the brothers were detained on March 12 while seeking classified information from a Russian source. Russian media reported it was a secret addendum to a published government report on Russia's energy strategy through 2020. On Wednesday, the FSB had searched the headquarters of TNK-BP and the representative BP office itself in Moscow, and seized documents. The FSB statement Thursday said the seized items included, "material evidence of industrial espionage." The service said it found "copies of documents issued by Russian state and executive agencies, reports, analytical materials." The service said it had found: "business cards of representatives of foreign defense departments and the Central Intelligence Agency." Alex Turkeltaub, a managing director at Frontier Strategy Group, an American risk consultancy company, said groups within the Russian government may be seeking to acquire valuable oil assets from foreign investors as part of a power struggle as Putin steps down as president this spring. Putin has said he will remain as prime minister to Dmitry Medvedev, now a first deputy prime minister, who was elected president on March 2. "The worst interpretation is that the scramble for power and influence in the new cabinet is shaping up already," Turkeltaub said. Alternatively, he said, the dispute is more narrowly focused on the brothers' activities in the industry or with the alumni groups. "The least likely version is that they were actually engaged in economic espionage," Turkeltaub said. A year ago, Royal Dutch Shell was accused of environmental shortcomings that some observers said were partially trumped up and forced to sell half its oil development on Sakhalin Island to Gazprom as a result.

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