January 31, 2011 / 11:56 AM / 9 years ago

UPDATE 2-Russia payout block fuels row over BP's Rosneft

* AAR board votes against Q4 dividend payment

* BP expected to reinstate payment with results Tuesday

* AAR move adds to pressure on BP’s Rosneft deal

* Rosneft postpones results to Feb 4

(Adds background and detail throughout, updates shares)

By Tom Bergin and Vladimir Soldatkin

LONDON/MOSCOW, Jan 31 (Reuters) - BP’s Russian partners in its TNK-BP joint venture turned up the heat on the British company to scrap or modify a rival tie-up with state oil group Rosneft (ROSN.MM) by resolving to block a $1.8 billion dividend.

Monday’s move could limit BP’s scope to up its own dividend in the future and may overshadow its results on Tuesday, when BP is expected to reinstate its payout, which it cancelled at the height of last summer’s Gulf of Mexico oil spill.

The AAR consortium, which owns the other half of TNK-BP, is fighting to stop BP’s proposed joint venture with Russian rival Rosneft after the two announced an Arctic exploration deal earlier this month. AAR is seeking a court injunction against it in London on Tuesday in a bid to maintain TNK-BP as the prime vehicle of BP’s operations in Russia and Ukraine.

BP says it needs its partners’ approval to form the planned Rosneft joint venture and wants to resolve the dispute amicably.

AAR’s board decided on Monday to oppose the payment of a fourth-quarter dividend when it is reviewed by the TNK-BP board. A meeting is scheduled for Feb. 18 but company sources said one may be called sooner at the request of the Russian shareholders.

But such a cut should not in the short term preclude BP restarting payments. Its finances are robust after it sold off a chunk of assets, oil is nearing $100 a barrel and the dividend is only half what it paid out pre-spill, analysts said.

However, a long-term cut to the TNK-BP payout could limit BP’s scope for raising its own dividend over time. It relies on the Russian joint venture for a quarter of its production, but high Russian taxes means it provides 10 percent of profits.

Beyond blocking BP-Rosneft and pushing for a piece of the action in the Arctic, AAR’s motives are difficult to fathom particularly given the Kremlin’s aspiration to transform state-controlled Rosneft into a global player.

Even BP sources say they are not sure what their Russian partners want, although they believe they could be seeking help to improve TNK-BP’s record in building its overseas presence.

Under a 2008 peace accord concluded after a bitter row over control and strategy at the joint venture, AAR won BP’s approval for expansion outside Russia. After the Gulf of Mexico spill, BP agreed to sell a package of oil and gas fields in Vietnam and Venezuela to the Russian venture for $1.8 billion.

Analysts say opportunities for TNK-BP to buy further assets from BP are limited. Attempts to develop in Algeria and Kurdistan have not delivered, although there has been some success in Venezuela.

AAR may also be seeking to maximise the value of its investment if it is ultimately to be folded into the Rosneft-BP partnership, banking and industry sources suggest.

Shares in BP were up 0.3 percent at 488.3 pence at 1347 GMT, while London's blue-chip FTSE index .FTSE was flat. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

PREVIEW-BP seen reinstating dividend [ID:nLDE70Q0ES]

POLL-Rosneft 2010 net profit seen up 60 pct [ID:nLDE70R1C1]

TAKE A LOOK-Russia tries fresh start [ID:nLDE70Q1Y9]

BREAKINGVIEWS-TNK-BP owners’ Rosneft ploy [ID:nLDE70U0L9]

GRAPHIC-Forecasts for BP dividend r.reuters.com/qan77r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

ARBITRATION

“It’s not surprising the Russian partners are upset, it’s going to be an issue for some time and it’s not clear how it’s going to be resolved,” Dougie Youngson, an analyst at Arbuthnot Securities, said.

BP said on Sunday it wanted to enter “fast track arbitration” to settle the dispute with AAR and had written to the chief executive of TNK-BP, Mikhail Fridman, requesting this.

The owners of AAR are resorting to a tactic that echoes a similar gambit by tycoon Vladimir Potanin in his bid to force Oleg Deripaska out of metals miner Norilsk Nickel (GMKN.MM).

Potanin, having secured control of the Norilsk board, has curbed dividend payments and instead channeled the company’s cash flows into a $3 billion share buyback this month that further tightens his grip on the company.

The AAR partners, especially oil-to-banking tycoon Mikhail Fridman, have a record of corporate conflict and litigation and the question is whether, after the BP-Rosneft deal, they have understood the Kremlin’s new rules of the oil game.

Those rules have been laid down by the BP deal, and a similar partnership struck last week by Exxon (XOM.N).

Rosneft said on Monday it would publish its full-year earnings on Friday February 4 instead of on Tuesday as previously planned, to avoid a clash of dates with BP. (Additional reporting by Melissa Akin in Moscow, Douglas Busvine in Vienna and Simon Falush in London; writing by Sophie Walker; editing by Alexander Smith)

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