In the wake of dismantling former Russian oil giant OAO Yukos, the Russian government hammered British Petroleum PLC‘s Russian joint venture with new back-tax claims totaling about $790 million. The news did not do much for the already jittery capital markets that are considering investments in Russia’s badly undercapitalized exploration and production infrastructure.
The news also came just weeks after Russian President Vladimir Putin promised in a meeting with local business leaders to control the excesses of Russian tax inspectors who have slammed numerous Russian companies over the past several years. In the case of Yukos, that conduct led to the effective nationalization of the company.
The BP Russian venture — called TNK-BP — announced that it would fight the claims, although that approach did not do Yukos much good. At least BP’s potential financial exposure is limited because the joint venture was formed only in 2003 in a transaction in which BP’s Russian partners agreed to carry most of the exposure.
Although Russian officials have sought to portray the Yukos case as an isolated event involving a rogue company, the tax claims against TNK-BP and others have continued to undermine investor confidence in the Russian business system. The current Russian government tax claims against TNK-BP are the largest against a company with a major foreign investor.
Meanwhile, in a closing statement during the Russian government’s trial of criminal charges against him, former Yukos chairman and CEO Mikhail B. Khodorkovsky laid the wood to the Russian government yesterday in which he alleged that the charges were “the fantasies of a pulp-fiction writer” meant to cover up the Russian government’s effort to seize his oil assets and silence him politically.