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Court Deals Blow to TNK-BP Chief

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Court Deals Blow to TNK-BP Chief

August 15, 2008; Page B4

LONDON — BP PLC said a Moscow labor court banned the chief executive of its Russian joint venture TNK-BP Holding from holding executive office in Russia for two years.

The company said it was disappointed with the decision and plans to appeal. “Robert Dudley has BP’s full support,” and can continue as chief executive outside Russia, a BP spokesman said. If the appeal fails, TNK-BP would have to find a new CEO, the spokesman said.

[Robert Dudley]

Alfa-Access-Renova, BP’s Russian partner in TNK-BP, wasn’t available to comment.

BP has been in a struggle with its Russian partners in TNK-BP over control of the venture. The dispute burst into the open early this year when the Russian principals, Mikhail Fridman of Alfa Group, Len Blavatnik of Access Industries and Viktor Vekselberg of Renova, demanded Mr. Dudley’s dismissal, complaining of mismanagement.

BP has stood by its chief executive and accused AAR of seeking to seize control of TNK-BP, but it has been fighting a losing battle.

“The Russian [investors] are getting away with nothing short of murder…they can terrorize BP, making any excuse to wrestle control of their joint venture,” said Fadel Gheit, an equity analyst at New York-based Oppenheimer & Co.

Mr. Dudley was forced to leave Russia in July after being denied renewal of his visa and claiming harassment from Russian authorities.

Chief Financial Officer James Owen quit earlier this month, citing the difficult working conditions at the company. BP was forced to withdraw 148 technical specialists seconded to the Russian venture in late July when they ran into visa difficulties amid AAR complaints that they were too expensive.

The permanent departure of Mr. Dudley will make BP’s position even more uncomfortable, Mr. Gheit said. “You cannot run a company long distance like that. You can’t control things by email and phone,” and it would be silly for BP to pretend otherwise, he said. If TNK-BP does get a new chief, AAR will be in the driver’s seat to make that choice, he said.

BP has to accept the fact that it will lose control of the joint venture and probably sell it to another Russian company, such as OAO Gazprom, Mr. Gheit said.

Write to James Herron at [email protected] and Alex Macdonald at[email protected]

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