SELECTION OF NEW TNK-BP CEO ALLOWS COMPANY TO

C O N F I D E N T I A L MOSCOW 002865 SIPDIS DEPT FOR EUR/RUS, EEB/ESC/IEC GALLOGLY AND GREENSTEIN, S/EEE MORNINGSTAR DOE FOR HEGBURG, EKIMOFF DOC FOR JBROUGHER NSC FOR MMCFAUL E.O. 12958: DECL: 11/23/2019 TAGS: EPET ENRG ECON PREL RS SUBJECT: SELECTION OF NEW TNK-BP CEO ALLOWS COMPANY TO FOCUS ON PERFORMANCE REF: MOSCOW 2353 Classified By: Econ MC Matthias Mitman for Reasons 1.4 (b/d) -------------- AAR CANDIDATE TO BE NEW TNK-BP CEO -------------- ¶1. (SBU) TNK-BP confirmed on November 19th the long-rumored selection of Maxim Barskiy as its next CEO. The 35-year old Barskiy will take the reins at the oil giant beginning in ¶2011. Barskiy, who was proposed by BP's Russian partners (AAR),beat out Pavel Skitovich, the candidate proposed by BP. Barskiy is expected to spend several months gaining further experience at BP, before returning to TNK-BP in a senior executive role and then, in 2011, taking over CEO job from acting CEO and AAR partner Mikhail Fridman. ¶2. (C) Prior to joining TNK-BP last year as Executive Vice President for Strategy and New Business Development as part of the CEO search process, Barskiy's main experience in the oil and gas sector was as Managing Director of the much small Russian oil company, West Siberian Resources. His bio indicates he is a graduate of Leningrad State University and of UC Berkeley. Before joining West Siberian Resources, Barskiy worked in a variety of positions in fund management and investment banking. According to Alexander Mikhailiants (protect),international advisor to TNK-BP COO Bill Schrader, Fridman knew and liked Barskiy from a previous association, and it was Fridman who brought him to TNK-BP. -------------- CLOSES DISPUTE CHAPTER -------------- ¶3. (C) BP Russia's Director of External Affairs, Anton Mifsud-Bonici (protect),told us BP is supportive of Barskiy, and welcomes a young CEO who is "not stuck in Soviet ways." Mifsud-Bonici stressed that, most importantly, the selection of a CEO closes the last major unfinished chapter of the BP-AAR dispute over the future TNK-BP, and paves the way for both sides to focus on the company's operational effectiveness. He also noted that the CEO role, while important, is not as powerful as it was before the new October 2008 shareholder agreement that ended the dispute. He explained that the board now needs to approve many of the major decisions, including any expenditures over $100 million, that the CEO could have made without board approval under the previous shareholder agreement. While insisting he was merely noting the uncertainties of the Russian business world and that he had no specific concerns in mind, Mifsud-Bonici also raised the possibility that Barskiy may yet not make it to the CEO's office -- "of course who knows what will happen in 12 months... 12 months is a long time in Russia." ¶4. (C) Mikhailiants independently echoed Mifsud-Bonici's observations regarding the importance of ending the CEO selection process and the limited powers of the CEO. He also observed that Schrader is a very experienced former BP executive in whom both BP and AAR have a lot of confidence. -------------- COMMENT -------------- ¶5. (C) The selection of a new CEO should indeed help an already-strong TNK-BP focus on its medium-term future, including its proposed 20% share float. With Schrader and other experienced executives covering important operational, finance, development, and downstream portfolios, Barskiy's lack of seasoning should not hinder the company. As both Mikhailiants and Mifsud-Bonici agreed, his selection also has the likely backing of the GOR, helping to fend off any unwelcome regulatory attacks against TNK-BP. That said, the long-term future of the company will depend on whether the GOR will tolerate a 50-50 foreign-private major company in a sector it has clearly indicated should be controlled by the state. Beyrle