BP in Russia: Bad Partners or Bad Partnerships? Business & Marketing

BP in Russia: Bad Partners or Bad Partnerships
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BP in Russia: Bad Partners or Bad Partnerships
Companies form strategic alliances to combine their resources so that they can get more benefits in terms of revenues and market share. However, not all business alliances are successful and some of them end up in conflicts among the involved parties. When it comes to the oil and gas industry, it is not easy to predict what will happen in the future since the industry is very dynamic. As such, companies dealing with petroleum products must be careful with whom they enter a partnership since in the end, it is all about controlling the industry. Before any company forms a strategic alliance with another firm, it must analyze the benefits it is obtaining and the share of the market it is getting. The paper focuses on the case of BP's new alliance with Rosneft Oil Company.
Rosneft and BP announced the creation of a new strategic relationship in January 2011. The two companies wanted to develop gas and oil reserves in the Russian Arctic continental shelf, which covers about 125,000 square kilometers in the Kara Sea (“BP In Russia: Bad Partners or Bad Partnerships,” 2017). However, BP had already entered a partnership with Alpha Access Renova (AAR), one of the largest of Russia’s privately-owned companies. For this reason, when AAR found out that BP wanted to form another partnership with Rosneft without informing it, AAR decided to become the barrier. AAR obtained several court injunctions, which broke the deal between BP and Rosneft. The failure of the Rosneft-BP partnership was due to poor alliance management. At this juncture, it is clear that when entering an alliance, companies have hidden agendas, which is the reason why partnerships should be scrutinized thoroughly to ascertain that partners have equal benefits. For example, the inter-partner conflict between BP and AAR prevented the former firm from forming a relationship with Rosneft. Besides, alliances are formed with specific goals and interests, which can change over time. While BP’s interests were to expand its revenues and oil assets through partnerships, AAR wanted to maintain the TNK-BP’s position, which would have been undermined by forming an alliance between BP and Rosneft. Consequently, business partners with different interests and goals are not beneficial since they prevent each other from achieving the strategic goals.
Since BP entered the oil market of Russia in 1997, the company grew due to forming alliances with others. For instance, in 1997, BP purchased a 10% shares in Sidanko for $571 million, which was a private company owned by the UNEXIM-MFK, a Russian banki...