* Co-owners of Anglo-Russian TNK-BP settle
* Arbitration proceedings dropped
* BP pays tycoons $325 million - sources
* Clears way for Rosneft takeover
By Andrew Callus and Douglas Busvine
LONDON/MOSCOW, Nov 13 BP moved towards
closer ties with Russia's Rosneft as its existing
partners in the oil-rich country dropped opposition to an
alliance with the state oil major in exchange for what sources
said was a $325 million payoff.
BP and AAR, the holding company of a group of Soviet-born
businessmen and co-owner of the TNK-BP venture being
sold to Rosneft, said they had agreed to end the legal battles
that had blighted their decade-old partnership.
Both sides last month decided that divorce was the best
option, agreeing separately to sell their TNK-BP stakes to
Rosneft in a $55 billion takeover.
The deals, which point to increasing state control of
Russia's energy assets under President Vladimir Putin, will make
Rosneft the dominant producer in the world's No.2 oil exporter
and give BP a 19.75 percent Rosneft stake.
The British company will now be free to revive efforts to
forge an offshore partnership with the Russian national oil
champion after a failed attempt last year landed in the courts.
"Today's agreement allows both AAR and BP to move forward
and focus on the future," said David Peattie, head of BP Russia.
$325 MILLION PAYMENT
"BP will be able to concentrate on the sale of our interest
in TNK-BP to Rosneft and on working more closely with them as we
develop the next stage of BP's long involvement in Russia."
AAR, which represents tycoons Mikhail Fridman, German Khan,
Viktor Vekselberg and Len Blavatnik, had won an injunction
blocking the deal, which was abandoned after an arbitration
panel found it violated TNK-BP's shareholder agreement.
The tycoons then launched a second round of arbitration to
determine whether BP had made itself liable to damages through
its agreement in January last year to exchange equity stakes and
explore for oil with Rosneft under Russia's Arctic waters.
Sources familiar with the matter said that the two sides
agreed to settle all their disputes, including arbitration,
before a final ruling by a London-based tribunal. The settlement
included a $325 million payment by BP to AAR, the sources said.
That is significantly less than the $5 billion to $10
billion that TNK-BP might have sought in damages had arbitration
found in favour of AAR, according to comments in May by sources
close to the shareholder group.
AAR Chief Executive Stan Polovets nonetheless declared
himself satisfied with the settlement, describing it in a
statement as a "win-win" for both sides.
"The settlement enables BP and AAR to focus on issues that
are most important at this stage - closing our respective
transactions with Rosneft and ensuring that TNK-BP continues to
operate at world-class levels during the transition period that
lies ahead," Polovets said.
Both sides declined on-the-record comment on the terms of
Until the settlement, BP had been unable to discuss any
other kinds of co-operation because of the legal wrangle in
Now it will be able to discuss the secondment of BP
engineers, exploration projects and other co-operation deals
with its new partner, including the potential revival of plans
for joint exploration in the Russian Arctic.
"BP is not taking an equity position in Rosneft as a
portfolio investor - they are looking at a future relationship
through which they can grow production and reserves in Russia,"
said Chris Weafer, chief strategist at Sberbank CIB.
"From Rosneft's perspective, they see the opportunity down
the road of expanding globally together with BP."
Since the collapse of last year's deal, Rosneft has signed
an offshore exploration deal with U.S. oil company ExxonMobil
, covering the three blocks in the Arctic's Kara Sea that
had been earmarked for BP.
Rosneft, headed by powerful Putin ally Igor Sechin, has also
partnered Italy's Eni and Norway's Statoil to
search for oil on Russia's continental shelf.