MOSCOW -- BP is conducting secret, high-level negotiations with the Russia-connected billionaires who co-own its troubled Russian venture TNK-BP and an outline deal to settle their dispute may come in weeks, a source familiar with the matter told Reuters.
Lamar McKay, a top BP troubleshooter brought in to resolve a long-running row over strategy and management control at TNK-BP, held a five-hour meeting in London the week before last with Mikhail Fridman, the billionaire oligarch who calls the shots on the Russian side of the company, the source added.
"The initial idea was to negotiate a quick two-pager to cease hostilities but this has now turned into something more substantial around agreeing the principles of how to run the company," the source said, speaking on condition of anonymity.
"A deal is a few weeks away. They are likely to sign something."
The crisis at TNK-BP, which produces a quarter of BP's worldwide oil output, hit the headlines after BP accused the Russian side of using 1990s-style corporate raider tactics to grab control of the venture.
The Russians said their only interest was to improve management performance and boost shareholder value. But company insiders have suggested they may be acting in concert with Kremlin officials who want to see a state company taking a stake in TNK-BP, which made $5.3 billion in net profit last year.
Top government officials have denied involvement, saying the dispute over TNK-BP is a matter for shareholders alone.
Stan Polovets, chief executive of the AAR consortium that groups the Russia-connected oligarchs, declined to discuss the talks. "We agreed not to comment on the negotiations and we feel it's really important to honor that agreement," he said.
A BP spokesman in Russia also declined to comment, beyond confirming that general discussions between the two sides were going on.
More Say For The Oligarchs
The source said discussions between BP and the oligarchs were proceeding on the basis that both sides would keep their current 50-50 shareholdings, but any deal would probably give the oligarchs more say in how the company is run.
"Holding an equity stake and having control are two different things in Russia," the source added.
One of the toughest issues in the talks was the question of who would replace TNK-BP's current chief executive, Robert Dudley, the source explained.
Dudley, a former BP executive whom AAR accuses of favoring his old employer, is managing the company from abroad, having left the country secretly in July citing harassment.
A Moscow court later banned him from working in Russia for two years, claiming labor law violations. District prosecutors questioned the ruling, saying it violated legal procedure and Dudley filed an official complaint against what he called "an abuse of power" by the labor inspectorate.
Sources close to TNK-BP describe the labor inspections, together with court action against the company in Siberia, raids by tax police, and swoops by the security services as part of a coordinated campaign of harassment intended to put pressure on the expatriate senior managers and secure control for AAR.
With Dudley already outside the country and two senior expatriate members of the management board having resigned -- downstream head Tony Considine and finance chief James Owen -- TNK-BP insiders expect more departures soon as the position of the remaining foreign senior managers becomes increasingly difficult.
Ironically, the dispute coincides with what TNK-BP said was its best-ever set of first-half results, showing record income and return on capital. The company has paid $18.1 billion in cash dividends to its shareholders since inception in 2003, though the Russian oligarchs have complained that performance is "unacceptable."