BP Blocks TNK-BP $1.8Bln Dividend

BP has blocked the payout of $1.8 billion in dividends to shareholders in TNK-BP, a source inside the British company said Sunday, striking back at the embattled joint venture's Russian partners in a messy fight for control.

BP prevented a decision on dividends at a TNK-BP board meeting in Cyprus on July 11, citing uncertainty over the firm's future, the source said.

"BP said that in the current difficult conditions in the credit markets, and in particular when such uncertainty exists around the company, it couldn't support issuing a dividend at this time," the source said.

BP and AAR, a consortium that groups four Russian billionaires, have been locked in an escalating dispute over control at the 50-50 joint venture. AAR has been seeking the ouster of Robert Dudley, who has served as TNK-BP chief executive since its founding in 2003, claiming that he has run the company in the interests of BP alone.

Dudley on Friday won temporary reprieve from threats that he would have to leave the country, with the Federal Migration Service extending his work permit by 10 days, to July 29.

By blocking the dividend issue, BP aimed to hit the Russian shareholders where they think it hurts most.

"They're there for the cash," the source said.

AAR chief executive Stan Polovets said in e-mailed comments Sunday that Dudley and TNK-BP chief financial officer James Owen recommended making the $1.8 billion first-half dividend payments but that BP directors requested to "delay the approval" until the next board meeting, on Sept. 24.

"AAR directors found BP's decision prudent and had no objections whatsoever to BP's proposal that the board revisit the issue" in September, Polovets said.

Since 2003, TNK-BP has paid nearly $18 billion in dividends to AAR. Mikhail Fridman, German Khan and four others split the earnings delivered to Alfa Finance, which owns 25 percent of TNK-BP through AAR. Viktor Vekselberg's Renova and Len Blavatnik's Access Industries evenly split the remaining 25 percent.

TNK-BP, the country's third-largest oil producer, has enriched Vekselberg and Blavatnik by $4.5 billion each, according to data confirmed by BP.

Vekselberg, a soft-spoken investor who also has interests in mining giant United Company RusAl, entered the Forbes list with a fortune of $2.5 billion during the year of TNK-BP's founding. Five years later, he has jumped to No. 61 on the magazine's list of the world's richest people, with a fortune of $11.2 billion.

The joint venture has also helped New York-based Blavatnik — a U.S. citizen and the world's 113th-richest person, with an estimated net worth of $8 billion according to Forbes — who doubled his fortune in the past five years.

"This is a divisive way of representing the ownership of a very successful company, that it's a dispute between Russians and foreigners," Alistair Graham, BP's chief liaison with TNK-BP, said last week, referring to the Russian shareholders instead as "international aristocrats, the oligarchs."

"It's a dispute between shareholders who are committed to the development of the company and a bunch of short-term investors," he said.

Dudley has warned TNK-BP employees that he could be the target of further lawsuits as the Russian shareholders continue a campaign to oust him from the company, according to an internal e-mail sent Friday.

Dudley sent the e-mail, a copy of which was obtained by The Moscow Times, on the same day that his work permit was temporarily extended.

The Federal Migration Service granted the extension following an international outcry over the apparent use of the government body in what Kremlin officials insist is a normal commercial dispute between shareholders.

Citing poor performance and failed international ventures, AAR has repeatedly denied claims that their attempts to push out Dudley — a U.S. citizen who originally joined BP through its merger with Amoco — speak to a wider strategy of trying to seize control before selling TNK-BP on to a state-controlled company.

One of the arrangements that AAR has proposed to BP to end the stalemate is reviving a sellout clause that expired at the end of last year. Expiration of the clause, which gave each shareholder the right of first refusal in the case of a potential sale, prompted increased speculation of an imminent deal with Gazprom or Rosneft.

"We've received a number of proposals from AAR, and an extension of the lock-in has been mentioned," Graham said last week. "There's been no discussion of that point," he added.

Fridman has said it is BP that is looking to bring in Gazprom unilaterally.

"I got the whole information about these talks the next day, after they had these discussions. This is Russia. It's impossible to make a secret out of it," he said in an interview with Reuters last month. "Of course, for them Gazprom is much more sexy than AAR."

BP denies discussing with Gazprom a potential buy-in to TNK-BP. Instead, they insist that TNK-BP has been profitable for all shareholders, personally enriching those who own AAR and comprising an astounding 25 percent of BP's global production.

In Friday's e-mail, Dudley warned that the filing of a lawsuit by several Russian TNK-BP employees alleging discrimination by Dudley— a move that BP says was backed by AAR — could severely harm the firm.

"For TNK-BP these accusations are extremely regrettable. They are potentially very damaging to the successful and united company we have built together," Dudley wrote.

Dudley blamed "some people" for attempts to forge strict divisions within the firm, "to create divisions and encourage staff to take sides."

"This will surely destroy value in our company," he warned.

BP has retained Russian law firm Egorov, Puginsky, Afanasiev & Partners, to advise it through the TNK-BP dispute. BP, which earlier this month brought a lawsuit against AAR over the payment of pre-merger back tax claims, has said it does not rule out further legal action.