The bitter dispute over BP’s controversial $16 billion (£10 billion) Arctic joint venture deepened yesterday after the oil giant and the oligarchs that control half its Russian business each voted down proposals aimed at breaking the impasse.
In January BP struck a deal with Rosneft to swap 5% of its shares in exchange for 9.5% of the Kremlin-controlled company. They also formed a joint venture to explore for oil in the Russian Arctic.
The deal upset the four billionaires that own half of BP’s existing Russian business, TNK-BP. They said the deal breached their shareholder agreement and proposed the tie-up be done via TNK-BP, rather than BP alone.
That idea was killed yesterday at a TNK-BP board meeting in Paris. BP’s directors voted against, while the Russian shareholders voted for. The three independent directors sided with TNK-BP but the deal needed unanimous approval to go ahead.
“Needless to say, management is very disappointed with the outcome of the board meeting,” said Mikhail Fridman, the chief executive of TNK-BP, who has been leading the fightback against BP. “We regret that the BP-nominated directors declined to support management’s recommendation.”
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BP yesterday proposed a compromise that would have allowed the share swap to go through and TNK-BP to open talks with Rosneft on the Arctic partnership. This was also rejected by the board.
Resolution will likely come from an independent arbiter, which is expected to rule within the next few weeks. Meanwhile BP and Rosneft’s hands are tied by a London court injunction obtained by TNK-BP.
Igor Sechin, the deputy prime minister of Russia and chairman of Rosneft, said: “We have the utmost respect for the London court, but whatever its ruling, Rosneft has the right to decide for itself who it will work with.”