2396 Words Apr 26th, 2013 10 Pages
Berge, Andrea
Spring 2013

Case Study: TNK-BP (Russia)

“This case portrays the highly uncertain scenario facing BP in Russia at the end of 2007. In the midst of unraveling relations with its cooperative partner and undesirable host government practices, ideal strategic conditions are implausible. In order to maximize outcomes under such imperfect circumstances, BP 's senior management needs to fully assess the situational risks, understand the dynamics and motivations driving stakeholder behavior, and establish a plan which can appeal to all interested parties.” TNK-BP is a joint venture established in February 2003 by BP and Alfa Access/Renova (AAR). The two companies combined their resources in Russia
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Russia’s legislature approved the forced transfer of certain fields to government-controlled firms. In 2006, Shell was forced to transfer an expansion project to Gazprom. That same year, concern over the possible revocation of the license to the Kovykta gas field and Gazprom’s ability to block construction of a pipeline to China, forced TNK-BP to sell its stake in the field. Gazprom purchased the stake for less than a third of its real value. The Russian government had also been known to both privatize or nationalize firms and rig auctions in order to favor government-controlled corporations.
Competitive Risks
The very nature of a joint venture lends itself to competitive risks. Competitive risks include: (1) opportunistic behavior; (2) misrepresentation of competencies; (3) failures to make resources and capabilities available; (4) failure to make alliance investments. The TNK-BP joint venture must deal with opportunistic behavior. Labor laws designed to limit the number of foreign nationals in top positions in natural resource companies are being exploited by TNK-BP. The Russian shareholders of AAR are using the laws to limit the number of foreign managers and specialists working in Russia. The ultimate goal is to place more Russians into top positions and to use the leverage provided by that leadership to achieve AAR objectives. The main dispute revolves around whether TNK-BP should be allowed to expand outside Russia

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