In December 2002, BBC’s Beijing correspondent Rupert Wingfield-Hayes covered Putin’s meeting with then-president Jiang and their signing of a joint declaration that addressed a number of international situations. The meeting was widely viewed as the beginnings of a new united front against U.S. hegemony.
In that report he wrote:
The power of either Russia or China to act independently from the United States is constrained by their economic dependence on the world’s remaining superpower.
This week brings the announcement of “a giant 17-billion-dollar project to supply Siberian gas to energy-hungry Chinese and South Korean markets from one of the world’s largest undeveloped gas fields.“
Rusia Petroleum, which is 63-percent owned by TNK-BP, signed a feasibility study with its partners the state-run China National Petroleum Corporation and Korea Gas Corporation, giving the initial go-ahead for the project.
Is President Hu Jintao taking some extraordinarily lengthy steps along the course initiated by his predecessor?
The 4,887-kilometre (3,055 mile) pipeline would transport gas from the vast Kovytka gas field near Lake Baikal in eastern Siberia to South Korea through China and the Yellow Sea.
This article in The Moscow Times refers to it simply as a BP-led pipeline. In September 2002, BP began aggressively pursuing a deal with Russian companies which led to a deal in February whereby BP agreed to pay billions in cash and equity for a 50% stake in a new company that incorporated Tyumen (TNK) and Sidanco. The Russian conglomerate, Alfa Group and Russian-American Access Industries /Renova Group, the owners of Tyumen Oil — control the other half.
There is quite a bit of history behind this new company. In 1999, Chernogorneft, the most profitable subsidiary of its also bankrupted holding company Sidanco, was sold at an auction dubbed “the theft of the century” by a keenly interested buyer and 10% shareholder of Sidanco, the Sputnik Group. At the time, BP also held 10% interest in Sidanco.
Boris Jordan, a New Yorker whose family left the Soviet Union in the 1920’s and fluent in Russian since childhood, went to Russia for the first time in 1992 as head of Credit Suisse First Boston’s (CSFB) Russian brokerage operations. The Sputnik Group was formed in 1998 by Jordan when he parted ways with Renaissance-Capital investment bank, a company he formed in 1995 with a former Credit Suisse First Boston (CSFB) employee.
In 1997, Jordan’s investment bank was an agent for U.S. financier George Soros in bidding for 25 percent of Svyazinvest, Russia’s monopoly telephone operator. Jordan’s main competitor was a syndicate formed by media moguls Boris Berezovsky and Vladimir Gusinsky – who accused him of unfair practices when the lot was finally sold to Soros for $1.875 billion, becoming Russia’s largest privatization deal.
The Soros Fund Management in New York would not comment on the deal, but Soros himself once said that the deal was a failure for him. “It was the worst investment of my professional career,” he wrote in his book “The Crisis of Global Capitalism: Open Society Endangered,” published in 1998.
Soros officials also declined to go into the organization’s overall relations with Jordan. 4/20/01
NEW YORK, Jan 12, 2000 — (PRNewswire)
TPT Limited today endorsed the agreement in principle announced in December between the shareholders of the Siberian Far Eastern Oil Company (“Sidanco”) and the shareholders of Tyumen Oil Company. The agreement in principle represents the first step toward a definitive resolution of the dispute between the parties over the ownership of Chernogorneft, Sidanco`s oil producing subsidiary.
TPT Limited is a company set up to invest on behalf of American and foreign investors in Sidanco through Kantupan Holdings Company Limited. Investors behind TPT Limited include the Sputnik Fund, which in turn invested in TPT Limited on behalf of American and foreign investors, including various funds for whom Soros Fund Management, L.L.C. is the principal investment advisor; the Harvard Management Company, Inc., which is the principal investment advisor to the Harvard University Endowment Fund; and Unifund S.A.
Mr. Boris Jordan, President of the Sputnik Fund and former Sidanco chairman, commented, “I am pleased that we have a framework for a settlement agreement and appreciate the constructive and instrumental role of Access Industries and its President, Len Blavatnik, in enabling this process to go forward. We look forward to continuing productive discussions with Mr. Blavatnik that will lead to a resolution of this matter, furthering our common interest in developing one of Russia`s most important energy assets.”
TPT Limited initiated litigation against Mr. Blavatnik, Access Industries, Inc., Renova, and Tyumen Oil Company in the New York State Supreme Court on November 22, 1999, concerning the bankruptcy of Sidanco and certain of its subsidiaries. Access Industries filed a motion seeking the immediate dismissal of that lawsuit with the New York State Supreme Court on December 13, 1999.
In light of the proposed settlement agreement, TPT Limited and defendants, including Mr. Blavatnik, the president and principal shareholder of Access Industries Inc., a privately held, U.S.-based minority investor in Tyumen Oil Company, Renova Inc., and Tyumen Oil Company, have reached a temporary standstill agreement in the New York litigation to enable the parties to pursue a definitive settlement agreement. (c) 2000 PRNewswire)
SIDANCO unexpectedly settled its quarrel with Tyumen Oil Company (TNK) at the end of December, and the new peace makes it likely that Sidanco`s bankruptcy will be called off. Under the agreement Sidanco takes back its chief operating subsidiary, Chernogorneft, from TNK, which bought the company at a bankruptcy auction early in December. Chernogorneft will be returned free of debts, and TNK will receive a 25% stake in Sidanco as compensation (Alfa Group, which controls TNK via offshore companies, originally had a third of Sidanco before being elbowed out by Interros and Uneximbank three years ago). The ugly battle over Chernogorneft cost TNK an expected $550m US credit, which the US Eximbank refused to guarantee at the end of December. However, TNK director, German Khan, said that he expects that decision to be reversed. The money would likely be released to support a joint-venture agreement between TNK and Sidanco to develop the Samotlor field with input from BP Amoco, which is a Sidanco shareholder.
Approval of the Ex-Im $500 million loan guarantee package for Russia’s troubled oil sector was blocked in Dec. ’99 by Madeleine Albright. BP had lobbied heavily for the loans to be turned down as a consequence for the Chernogorneft takeover by Tyumen (TNK).
The Clinton administration denied being influenced by Russia/Chechnya concerns even while “presidential contenders Texas Gov. George W. Bush (R), Sen. John McCain (R-Ariz.) and former senator Bill Bradley (D-N.J.)—called for a cutoff in Ex-Im Bank lending to Russia because of the Chechen war.”
Albright lifted the ban in March ’00 and the loan was approved in April despite Tyumen’s ‘egregious corporate history’. The settlement may have been one factor. She was also being pressured by U.S. industrialists, including Dick Cheney, whose company Halliburton had been contracted to “rehabilitate Tyumen’s Samotlar oil field in western Siberia,” a project dependent on the loans. George W. obviously overcame his concerns for Chechnya as he took Cheney on as a running mate soon afterwards in July.
At this point one might come to the conclusion that Access Industries in cahoots with the alleged gangsters of Alfa, with valuable business ties to Halliburton , Texaco then and Chevron-Texaco now [2], took advantage of weaknesses in Russia’s bankruptcy laws, coupled with some illegal maneuverings, and edged out other U.S.-international investors.
TNK-BP seems to be a merger of necessity for many of these former adversaries with BP, for the time being, hanging on tenuously to slightly more shares than the rest and taking the greatest risk in this new pipeline.
From the TNK-BP website, created in September:
In summer, 2003 BP and AAR completed the deal to set up the new company and TNK-BP became operational. The company’s forthcoming plans include further development of its assets in Russia and CIS, increased oil and gas production through introduction of new technologies and active promotion of projects in East Siberia and Sakhalin along with continuing reserve growth and realization of a number of new strategic projects.
The emergence in September of an economic elite within CIS, a Union of Four pact signed onto by Belarus, Kazakhstan, Russia and Ukraine, was predicted to cause problems for other member states, particularly those that benefit from U.S. interest. Georgia’s President Eduard Shevardnadze attempted to appear open to working with the Union of Four prior to the Nov. 2nd parliamentary elections, hoping to swing Russian support his way, knowing any real cooperation would likely damage U.S.-Georgia relations.
According to this article, Shevardnadze has become so desperate to divert attention from voting irregularities in that Nov. 2nd parliamentary vote and the resultant calls for his resignation, he’s bonded with a despised autocrat, Ajarian leader Aslan Abashidze, deploying him as an envoy or decoy, if you will. Jaba Devdariani, the journalist who wrote the article, believes the solicitation of this alliance will obligate Shevardnadze to both Abashidze and Putin enough it could cause him to shift his pro-Western stance.
Yet the sum of his relevance to these Western allies seems to begin and end not in their support of human rights for Georgians, but with their political and economical investments in the BTC pipeline, yet another endeavour that BP appears to head.
It’s quite possible that Hu’s potential foothold may be the safest bet in all of this, and if that’s the case, U.S. hegemony could very well take the hit Jiang envisioned.