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Medvedev questions future of BP Medvedev questions future of BP
(40 minutes later)
The Gulf of Mexico oil disaster could cost BP $40bn, analysts sayThe Gulf of Mexico oil disaster could cost BP $40bn, analysts say
Russian President Dmitry Medvedev has questioned the future of BP, saying the oil giant may face "annihilation" after the Gulf of Mexico oil spill.Russian President Dmitry Medvedev has questioned the future of BP, saying the oil giant may face "annihilation" after the Gulf of Mexico oil spill.
In an interview with the Wall Street Journal, he described the spill as a "wake-up call", and said that "hopefully [BP] can afford the losses".In an interview with the Wall Street Journal, he described the spill as a "wake-up call", and said that "hopefully [BP] can afford the losses".
Moody's rating agency also downgraded BP's credit rating by three notches.
BP, which says its finances are sound, has agreed to put aside $20bn (£13.5bn) to compensate victims of the oil spill.BP, which says its finances are sound, has agreed to put aside $20bn (£13.5bn) to compensate victims of the oil spill.
The company's share price has also been hammered since the spill began. Moody's said the full costs of the oil spill would have a negative impact on the company's cash flow for "a number of years".
"What I know is that BP will have to pay a lot of money this year," Mr Medvedev said. As a result, it downgraded BP from A2 to Aa2.
However, it said the company's payments into the compensation fund were "manageable".
Earlier this week, the two other major international credit ratings agencies, Fitch and Standard & Poor's, also downgraded BP.
'Complacency'
Mr Medvedev was less sure about BP's ability to cover its payments in the coming months.
"What I know is that BP will have to pay a lot of money this year," he said.
"Whether the company can digest those expenditures, whether they will lead to the annihilation of the company or its break up is a matter of expediency"."Whether the company can digest those expenditures, whether they will lead to the annihilation of the company or its break up is a matter of expediency".
BP has said that it continues to perform well, with cash flow "expected to exceed $30bn in 2010 before taking into consideration costs related to the Deepwater Horizon spill."BP has said that it continues to perform well, with cash flow "expected to exceed $30bn in 2010 before taking into consideration costs related to the Deepwater Horizon spill."
On Thursday, BP boss Tony Hayward was grilled by US congressmen who accused the company of "astonishing complacency" in ignoring dangers when drilling in the Gulf of Mexico.On Thursday, BP boss Tony Hayward was grilled by US congressmen who accused the company of "astonishing complacency" in ignoring dangers when drilling in the Gulf of Mexico.
Asset saleAsset sale
BP has agreed to pay $5bn into the compensation fund this year, followed by quarterly payments of $1.25bn until the total $20bn is paid.BP has agreed to pay $5bn into the compensation fund this year, followed by quarterly payments of $1.25bn until the total $20bn is paid.
The company has also said it will be selling about $10bn worth of "non-core" assets to raise cash, and has cancelled dividend payments this year.The company has also said it will be selling about $10bn worth of "non-core" assets to raise cash, and has cancelled dividend payments this year.
There has been a great deal of speculation about what assets it might sell.There has been a great deal of speculation about what assets it might sell.
In Russia, BP holds a 50% stake in TNK-BP - a joint venture with AAR, which is owned by a group of Russian billionaires.In Russia, BP holds a 50% stake in TNK-BP - a joint venture with AAR, which is owned by a group of Russian billionaires.
The relationship between the two partners has been a stormy affair.
After joining forces in 2003 to become Russia's third-biggest oil producer, TNK has accused BP of wielding too much power, while BP has countered by accusing TNK of trying to take control of the joint venture.
BP also owns about 1% of the Russian state-run company Rosneft.BP also owns about 1% of the Russian state-run company Rosneft.
According to analysts at Moscow investment bank Troika Dialogue, BP's stake in TNK-BP is worth about $16-$18bn. Its share of Rosneft is worth another $900m. According to analysts at Moscow investment bank Troika Dialog, BP's stake in TNK-BP is worth about $16-$18bn.
Rumours about a possible sell-off caused Rosneft's share price to fall by 6% on Thursday. However, analysts said that BP may have to take a hit on the price if it is forced to sell.
"If BP decides to sell its [stake in TNK], it will have to do so with a discount to find a buyer faster," Viktor Mishnyakov, energy expert from Uralsib, told the BBC Russian Service.
BP's share in Rosneft is worth another $900m. Rumours about a possible sell-off caused Rosneft's share price to fall by 6% on Thursday.
The head of BP's Russian operations was forced to deny the rumours on Friday, saying that BP has yet to decide exactly which assets to dispose of.The head of BP's Russian operations was forced to deny the rumours on Friday, saying that BP has yet to decide exactly which assets to dispose of.
For its part, Lukoil, one of Russia's biggest oil producers, said it would not be interested in buying any of BP assets should the UK oil company decide to sell.For its part, Lukoil, one of Russia's biggest oil producers, said it would not be interested in buying any of BP assets should the UK oil company decide to sell.
"We are not wolves, we do not eat the weak," said the company's boss Vagit Alekperov."We are not wolves, we do not eat the weak," said the company's boss Vagit Alekperov.
Rising costsRising costs
BP made a profit last year of $14bn, down from $25bn a year earlier.BP made a profit last year of $14bn, down from $25bn a year earlier.
Analysts say that the compensation fund and initial clean-up costs would, therefore, be easily affordable for BP.Analysts say that the compensation fund and initial clean-up costs would, therefore, be easily affordable for BP.
However, they also warn that the threat of legal action and significant fines means it needs to conserve cash.However, they also warn that the threat of legal action and significant fines means it needs to conserve cash.
Standard Chartered warned last week that the total cost to the company, including legal costs, could top $40bn.Standard Chartered warned last week that the total cost to the company, including legal costs, could top $40bn.