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BP has discussed the outline of a possible settlement with its Russian billionaire joint venture partners in TNK-BP to try to resolve an acrimonious dispute between the two sides, according to people familiar with the situation.
The talks on a settlement, which would involve the transfer of some BP assets to TNK-BP, come ahead of a critical board meeting of the venture in Brussels on Friday. Directors will hear recommendations from two independent international law firms on whether to file suit against BP over its failed alliance with Rosneft, the Russian state oil champion.
There have been preliminary discussions on a peace deal in recent weeks, people close to the situation confirmed, although no formal talks are currently taking place.
Under the proposal, both sides would acknowledge their differences but make a firm commitment to the future of the venture. The proposal would also require agreement on the cessation of all outstanding legal action – including all claims from any minority shareholders in TNK-BP – and BP would agree to transfer some assets, deemed a “sensible” value.
“Such a potential settlement is possible but the parties are very far from agreeing on the nature of the settlement and no talks are being held,” said one person close to AAR.
Relations between the UK energy group and Alfa-Access-Renova (AAR), the vehicle through which the Russian partners hold their stake in the venture, have become increasingly strained since January when BP announced a proposal to team up with Rosneft to explore the Arctic. AAR claimed BP broke TNK-BP’s shareholder agreement stipulating any new ventures in Russia and Ukraine need to be offered to the joint venture first. BP has always denied the Rosneft deal was in violation of the agreement.
AAR blocked the alliance by winning an injunction from Stockholm then later rejected a $32bn buy-out offer tabled by BP and Rosneft in an effort to break the deadlock. Although the Rosneft deal has since collapsed, arbitration proceedings have continued.
Any deal is unlikely to be agreed in the short term, if at all.
The preliminary soundings come ahead of Friday’s board meeting where TNK-BP’s independent directors, including former German chancellor Gerhard Schroeder, are likely to have a decisive vote on the issue of the damages claim. BP has always insisted no grounds exist as TNK-BP was not damaged.
“The issue is coming to a head,” said a person close to TNK-BP management.
The directors will also look at a possible, separate case by BP against Viktor Vekeselberg’s Renova Group, one of the companies that makes up AAR.
AAR declined to comment. BP said it would not comment “on speculation about any commercial discussions we may have with AAR”. It added that it had not changed its position that “we have not breached the TNK-BP shareholder agreement and that TNK-BP incurred no loss as a result of the incomplete Rosneft deal”.