BP loosens TNK-BP grip to end fight with oligarchs

By Tom Bergin and Melissa Akin

LONDON/MOSCOW (Reuters)- BP (BP.L) bowed to demands from its partners in TNK-BP and eased its grip on Russia's third-largest oil producer on Thursday to end a bitter dispute that had knocked BP's shares and rattled investor confidence in Russia.

TNK-BP's top management, including BP-nominated Chief Executive Bob Dudley, will be replaced, independent directors will be added to the board and the owners will consider floating 20 percent of the joint venture.

BP shares rose 4 percent on news of the framework deal.

BP and Alfa Access Renova (AAR), the vehicle that represents the four Russia-connected billionaires who own 50 percent of TNK-BP, said the deal would be finalized in the coming months.

"This would be a much better outcome for BP than the market has been anticipating," Richard Griffith at Evolution Securities said.

Investors had feared the hostile battle for control of TNK-BP might lead to BP losing interest in the joint venture, which analysts said was worth $45 billion, with only minimal compensation.

BP Chief Executive Tony Hayward said the terms agreed meant it retained key protections BP agreed five years ago, although its effective management control over TNK-BP had been weakened.

"We've made some modest adjustments to give the company a little more freedom," BP Chief Executive Tony Hayward told Reuters in a telephone interview.

"We think this provides the platform for the next phase in its (TNK-BP's) development and we look forward to continuing to grow," he added.

Hayward said he hoped recent attacks on TNK-BP, including raids on its offices by security forces and tax probes, which had prompted Dudley to flee Russia citing a campaign of harassment, would now become less of a problem.

Russia's deputy prime minister Igor Sechin, a close ally of Prime Minister Vladimir Putin and chairman of state-controlled Rosneft (ROSN.MM), was quoted in AAR 's statement as praising the partners for resolving their differences themselves.

"We support TNK-BP's development and believe this company has excellent long-term prospects," Sechin said.

FEWER LEGAL PROBLEMS

The feud, combined with a government attack on a blue-chip steel company and Russia's brief war in Georgia, contributed to Russia being one of the world's worst performing markets in the second half of 2008 so far, despite booming commodities exports.

BP accused its partners of behaving like corporate "raiders" from Russia's chaotic 1990s when asset stripping and partner dilution was common. The Soviet-born billionaire co-owners, led by Mikhail Fridman, in turn accused BP of running TNK-BP like a subsidiary and Dudley of favoring BP interests.