How Moscow Will Respond to Britain's Expulsion of Russian Diplomats
Britain's soft spot in Russia is BP. Watch for Russia's response to today's expulsion announcement not only in a predictable tit-for-tat removal of British diplomats from Moscow, but in a tougher line toward the British oil giant.
In the past, Britain's Russia policy has been led by the requirements of BP, its largest publicly held company. And BP has walked softly with Moscow from the time of the Soviet collapse. In the 1990s, BP opposed the U.S.-backed Baku-Ceyhan oil pipeline, until it decided that its U.S. interests -- its wish to purchase Arco -- trumped its plans for the former Soviet Union. The British government walked lock-step with BP in the anti-, then abruptly pro-pipeline policies.
In the past few months, BP, like some of the other multinational oil companies, has buckled under to Moscow; they have had to because of the much more challenging global exploration environment. So it is that BP has provided cover to a Russian "auction" of a Yukos property by making a "bid" on it; and it has surrendered its rights to the Kovykta natural gas field.
In expelling four Russian diplomats, Britain has taken a principled stand on the Litvinenko murder case. A component of Moscow's calibrations is likely to take note that a quarter of the global production of Britain's marquee company -- BP -- comes from Russia. That is where President Putin is likely to pressure Britain.
In the past, Britain's Russia policy has been led by the requirements of BP, its largest publicly held company. And BP has walked softly with Moscow from the time of the Soviet collapse. In the 1990s, BP opposed the U.S.-backed Baku-Ceyhan oil pipeline, until it decided that its U.S. interests -- its wish to purchase Arco -- trumped its plans for the former Soviet Union. The British government walked lock-step with BP in the anti-, then abruptly pro-pipeline policies.
In the past few months, BP, like some of the other multinational oil companies, has buckled under to Moscow; they have had to because of the much more challenging global exploration environment. So it is that BP has provided cover to a Russian "auction" of a Yukos property by making a "bid" on it; and it has surrendered its rights to the Kovykta natural gas field.
In expelling four Russian diplomats, Britain has taken a principled stand on the Litvinenko murder case. A component of Moscow's calibrations is likely to take note that a quarter of the global production of Britain's marquee company -- BP -- comes from Russia. That is where President Putin is likely to pressure Britain.
6 Comments:
No question that British foreign policy in the FSU has been heavily influenced by BP in recent years. But, when push comes to shove, who needs whom more? Putin may not like it, but his chums at Rosneft, Gazprom, and the rest, are highly dependent on London's fund managers and on the London Stock Exchange's International Order Book. For the past year there have been lots of rumblings about tightening the listing requirements. A few tit for tat diplomatic expulsions are one thing. But if Russia starts getting nasty, London has the capability of hurting the Russian elite where it really counts -- in their market cap numbers.
Fred, very interesting comment. One wonders subsequently whether Russia's economic foray abroad into the financial sphere leaves it oddly vulnerable at home in terms of its oil and pipeline policies. The next few days bear watching.
Oh I don't think that's really the key vulnerability, Steve. What's at stake is the net worth of senior managers at state-controlled but London-listed companies. Most of these guys were nobodies before Putin came along and gave them mandates to enrich themslves. Now they're zillionaires. I don't think they'll be very pleased to see their shares take a dive.
By the way, there's an intriguing remark in tonight's/tomorrow's Moscow Times:
Valentin Zorin, a professor at the United States and Canada Institute of the Russian Academy of Sciences, said Britain could not do any real harm to Russia, as it was far more powerful than Britain.
Missile for missile, that's undoubtedly correct. But how many British flotations have there been in Russia lately? They may not act like it sometimes, but Russia's plutocrats do actually have to live in the real world.
Russia will definitely retaliate in kind: expelling British diplomats and tightening its own visa rules with respect to UK visitors.
However, is it in Russia's interest to escalate the situation? As someone else noted above, Russia's presence in world stock markets probably limits its options.
Also, do you know if Russian energy companies need BP (and other Western companies) for technology? Just the other day Russia did a U-turn on its policy of preserving the Stockman gas field solely in Gazprom's hand. Bringing Total on board, many say, is a sign that the Russians lack technology and expertise for such projects.
Finally, Putin and Co's ratings are already high and they will most likely win the upcoming elections. Is it worthwhile for them to strain relations further?
I guess, all our questions will be answered very soon.
Steve, your post and this conversation answers the question that I was not able to ask tonight. Thanks again for providing in your most capable way a most informative background to what is going on. I look forward to buying (at least one copy of) your book.
I agree with the anonymous post above, all of our questions will be answered soon. Will this continue to play out like a Bourne Identity movie, or will it get truly nasty, with more than just the lives of insiders and "thugs" at stake?
Thanks again for the background and the teaser for the book.
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