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Russia holds TNK-BP employee for ‘spying’

By Catherine Belton in Moscow

Published: March 20 2008 16:25 | Last updated: March 20 2008 16:25

The diplomatic row between Russia and the UK threatened to spill over into the business sector on Thursday after Russia’s security service said it had detained an employee of TNK-BP, BP’s Russian oil joint venture, for spying.

Only one day after police raided BP’s Moscow office and those of TNK-BP, Russia’s Federal Security Service said it had detained two brothers, one of whom worked at TNK-BP, for industrial espionage.

The FSB, the successor agency to the Soviet-era KGB, named the two brothers as Alexander and Ilya Zaslavsky, and said they had been detained on March 12 for ”collecting classified commercial information for a series of foreign oil and gas companies in order to gain concrete advantages over their Russian competitors”.

It said the two brothers had both Russian and US citizenship. It identified Ilya as an employee of TNK-BP and Alexander as the head of the British Alumni club, a networking club for Russian professionals who studied in the UK, which is run under the auspices of the British Council.

The news raised fears that the state could be moving in on TNK-BP, which is half owned by BP and half by a trio of Russian billionaires, as it tightens its grip over the energy sector.

The company’s 50 per cent foreign ownership is seen by analysts as an anomaly in Russia after a series of controversial campaigns, including one that forced Royal Dutch Shell to sell control of its Sakhalin-2 oil and gas venture to Gazprom, the state-controlled energy group, after alleged environmental infractions.

TNK-BP has been at the centre of constant speculation that it is next on Gazprom’s takeover list. TNK-BP’s Russian investors have repeatedly denied they are seeking to sell. The company was forced to sell its flagship gas venture, the Kovykta gas field in east Siberia, last year to Gazprom after alleged licence violations. But closure of the deal has been repeatedly delayed due to disagreement over price.

”This is another example of the way the Kremlin negotiates,” said Chris Weafer, chief strategist at UralSib investment bank. ”This is a similar approach to what we saw with Sakhalin-2.

”It looks like they are upping the pressure to get a deal,” he said.

If it was an escalation of a political row between Russia and the west ”that would raise a lot of questions for other companies in foreign hands”, he added.

Political ties between Russia and the UK have already sunk to a post-cold war low in a series of diplomatic rows following the death through polonium poisoning of Alexander Litvinenko in 2006.

The British Council was forced to close its regional offices in St Petersburg and Ekaterinburg in January this year after the FSB called in its Russian staff for questioning amid a row over the UK cultural body’s legal status in Russia.

There are hopes in western capitals that Russia’s president-elect, Dmitry Medvedev, could pursue a softer line in foreign and economic policy. Mr Medvedev has styled himself as a proponent of liberal economic reforms. But he has also been one of the harshest critics of the British Council, accusing it of being a front for spies in a recent interview. Under his watch as chairman of Gazprom, the state-controlled energy giant has taken over a large swathe of the nation’s oil and gas sector in a series of controversial deals.

The British Embassy in Moscow said it was monitoring the situation surrounding TNK-BP closely. The British Council said it was concerned by the news but noted that Mr Zaslavsky was not a member of the British Council’s staff.

The US said it was seeking to confirm the reports that US dual nationals had been arrested. “If any American citizens were arrested, we will request access to speak and visit them, as is customary when American citizens are detained abroad,” said Sean McCormack, State Department spokesman.

TNK-BP said in a statement on Thursday that it did ”not condone illegal activities, nor do we rely on unfair competitive practices”.

”The company has never countenanced or supported any action designed to contradict or damage the interests of Russia,” the statement said.

TNK-BP has been the target of previous FSB probes over whether its foreign employees might have been given access to state secrets, including to data on the country’s oil and gas reserves which under Russian law is classified. One of TNK-BP’s Russian owners, Viktor Vekselberg, said in an interview in 2004 that the company faced problems over the access its foreign executives had to reserve data.

The FSB said in its statement on Thursday that during the raids on the TNK-BP offices it had found ”proof confirming industrial espionage” including copies of government documents, analytical reports on reserves and the business cards of ”employees of foreign military services and the CIA”.

Additional reporting by Daniel Dombey in Washington

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