Russian billionaire Mikhail Fridman has threatened to sue the UK government in an escalating row over whether his energy fund run by former BP boss Lord Browne can be blocked from taking over 12 North Sea gasfields.
Fridman, one of Russia’s richest men, warned he may seek compensation in court from the government if the energy secretary, Ed Davey, carries out a threat made at the weekend to prevent LetterOne from taking control of the fields.
Despite the warning that he could be ordered to sell the fields, Fridman’s LetterOne – a $29bn investment fund based in Luxembourg – went ahead on Monday with plans to buy RWE Dea, the oil and gas arm of German gas giant RWE, which owned the North Sea fields as well as others in 17 other countries, including Germany, Denmark, Algeria and Libya.
In a separate announcement, LetterOne confirmed on Monday that Lord Browne would take charge of its energy division, L1 Energy, a $10bn fund, with immediate effect.
Browne has been advising Fridman since 2013, after a 41-year career at BP that included more than a decade as chief executive.
The British business executive, who has also advised the British government, will stand down from his roles at the Riverstone energy fund and fracking company Cuadrilla.
Browne’s departure is a blow to from Cuadrilla as it faces public scepticism about the environmental costs of fracking. He will stay on as chairman until a replacement is found, the company said.
His decision to sign up with LetterOne could bring him into the crosshairs of a testy legal battle, as Russian firms become embroiled in western sanctions over Ukraine.
The Department for Energy and Climate Change (DECC) said at the weekend it may not allow the North Sea gasfields to fall into LetterOne’s hands, citing the risk of sanctions and “the serious health and safety and environmental risks that may result”.
To get around sanctions, LetterOne had proposed that its UK business would be operated by RWE Dea and monitored by a Dutch company, but Davey rejected this plan.
In a letter to Davey released on Monday, LetterOne said it was “deeply disappointed” by the government’s announcement and reacted angrily to its timing, less than 48 hours before the £3.7bn deal went ahead.
In a letter signed by chief executive Jonathan Muir, LetterOne said that, if ordered to sell the North Sea assets: “We intend to seek judicial review of DECC’s decision and fully reserve all of our rights … [including] our right to seek compensation for any damage caused to the value of our investment in RWE Dea by DECC’s decision.”
The DECC had no immediate response to the latest developments.
Fridman has an estimated fortune of £9.7bn , according to Forbes magazine. He started work in the dying days of the Soviet Union, selling cut-price theatre tickets, and went on to build a business empire spanning banking, oil, telecoms and supermarkets. But unlike high-profile oligarchs, such as Mikhail Khodorkovsky or the late Boris Berezovsky, Fridman has largely steered clear of politics.
He has acquired a reputation as a fierce businessman, and was part of a quartet of Russian billionaires who went into business with BP in the highly profitable, though politically fraught TNK-BP venture.
Bob Dudley, TNK-BP’s American boss, was chased out of Moscow in 2008, after a sustained campaign of harassment that appeared to be instigated by his Russian business partners.
In his memoirs, Beyond Business, Lord Browne recounts that “a low-level guerrilla war was carried on inside the company, often with the intention of undermining the expatriate BP staff”. He describes Fridman as second in command in the Russian state and a tough negotiator: “He would give you the feeling that he would rather forfeit everything than give up on a single crucial point.”
Browne crossed with Fridman in the late 1990s, when BP battled Fridman’s Alfa Group for ownership of Sidanco, then Russia’s fifth-largest oil company. Fridman’s hostile takeover won out and the episode left BP nursing a £200m loss.
The LetterOne group was created by Fridman and his business partners, with proceeds from the sale of TNK-BP, after the Kremlin energy giant Rosneft bought out the private Russian businessmen in 2013.
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