POLITICAL RISK

Political Risk in International Trade

Political Risk in International Trade

Political Issues and Problems in BP and Rosneft

It appears that Russia is poised to approve the deals that can increase size of their State oil company Rosneft to double, carrying industry which is more than half of country's oil industry under the control of government first time after two decades, and emerging as a new player all over the world. The main part of the maneuvering is the third largest oil company named TNK-BP, which is a joint venture between four Russian billionaires and one of the largest British Oil Company “BP”. After shifting operations of BP from private hands to the hands of State, there are many risks involved both for the Russian industry and the company itself (Kramer, 2012). After inception of BP partnership with private companies in the year 2003, the company has yielded a return of 34%, but in the year 2006, when initial public offering was held by the state company, BP suffered from a loss. The main reason behind that loss was the behavior of the State with the company as it was tempting to milk oil industry as a cash cow. The control of the Russian government in that year was expanding and high taxes were charged from the partnership company, which led heavy loss to the company. A risk analyst stated that expansion of Rosneft tempted the government of Russia to use the company strategically in order to influence oil prices (Kramer, 2012).

In the year 2007, the biggest challenge that BP faced was to boost capital spending for ensuring that safety standards are tightened for their global operations. The reputation of BP in its most important market US was tarnished because of negative publicity made by the families of people who were ...