BP moves to settle Russia dispute

The row has focused attention on the rights of foreign investors in Russia.

BP has signed an agreement aimed at solving a festering dispute over control of its Russian venture TNK-BP.

The boss of TNK-BP, Robert Dudley, will step down as part of the deal with the Russian billionaires that control half of the business.

Three independent directors will also be appointed to TNK-BP’s board.

Mr Dudley’s departure had been central to the power struggle between BP and the Russian investors in the venture, which accounts for 25% of BP’s profits.

The memorandum of understanding, signed on Thursday, also includes the option to list up to 20% of the venture on international markets.

TNK-BP’s Russian partners had long called for Mr Dudley’s departure and Mr Dudley left Russia in July in the face of what he said was “sustained harassment”.

This is a positive signal for the Russian market Igor Sechin, Russian deputy prime minister

BP said it had agreed to offer a Russian-speaking candidate for the post, with extensive Russian business experience.

The Russian shareholders had accused BP of running TNK-BP like a subsidiary and Mr Dudley of favoring the British shareholder.

BP chairman Peter Sutherland said that the agreement, to be finalised over coming months, would relieve recent tensions between the two sides.

“It will create a stable base from which to grow the joint venture to the benefit of everyone involved, including the Russian state,” Mr Sutherland said

He said that Mr Dudley had been an outstanding chief executive and would be hard to replace.

‘Positive signal’

BP owns 50% of the venture while the Russian shareholding is made up of a number of Russian billionaires who control a consortium known as Alfa Access Renova (AAR).

Russia welcomed the compromise between AAR and BP.

“We are pleased that this situation has been resolved and the shareholders have come to an agreement without the involvement of third parties, including the state,” said Igor Sechin, Deputy Prime Minister of the Russian Federation.

“This is a positive signal for the Russian market. We support the development of TNK-BP and believe that this company has excellent long-term prospects.”

Viktor Vekselberg, chairman of Renova, said the agreement was the result of difficult negotiations.

“Most importantly, emotions were not allowed to prevail over common sense and both sides found the solution that best meets the interests of TNK-BP,” he said.

Russia recognises Georgian rebels

Many South Ossetians feel closer to Russia than Georgia

President Dmitry Medvedev has declared that Russia formally recognizes the independence of the breakaway Georgian regions of South Ossetia and Abkhazia.

The move follows a vote in both houses of parliament on Monday, which called on Moscow to recognize the regions.

Mr Medvedev defied a specific plea from US President George W Bush not to go ahead with the move.

Russia and Georgia fought a brief war this month over the provinces, which already had de facto independence.

Analysts say the move is likely to further escalate tensions between Russia and the West.

Rift with Nato

“I have signed decrees on the recognition by the Russian Federation of the independence of South Ossetia and the independence of Abkhazia,” Mr Medvedev said in the announcement.

“That was no easy choice to make, but it is the sole chance of saving people’s lives,” Mr Medvedev added.

He blamed Georgia for failing to negotiate a peaceful settlement to the problem and called on other states to follow Russia’s example.

US Secretary of State Condoleezza Rice, speaking from the West Bank city of Ramallah, said Russia’s decision was “regrettable”.

The US state department had warned that recognition of the two provinces’ independence would be “a violation of Georgian territorial integrity” and “inconsistent with international law”.

In a statement, Mr Bush called on Russia’s leadership to “meet its commitments and not recognize these separatist regions”.

In the two breakaway regions, however, Moscow’s move was warmly welcomed.

Residents in Abkhazia took to the streets to celebrate the news, firing into the air, Reuters reports, and in the South Ossetian capital of Tskhinvali there were scenes of jubilation.

‘New understanding’

Earlier on Tuesday, Russia cancelled a visit by Nato’s secretary general, one of a series of measures to suspend co-operation with the military alliance.

Russia’s ambassador to Nato said the trip would be delayed until relations between the two were clarified.

Dmitry Rogozin said a “new understanding” needed to be reached between Russia and Nato.

The recognition is bound to dramatically heighten tensions in Russia’s already fragile relationship with the West.

He says this and a series of other announcements indicate that Russia is preparing itself for a showdown.

Although most of Russia’s forces pulled out of the rest of Georgia last Friday, it is maintaining a presence both within the two rebel regions and in buffer zones imposed round their boundaries.

Port control

Some Russian troops also continue to operate near the Black Sea port of Poti, south of Abkhazia, where Russia says it will carry out regular inspections of cargo.

The US said on Tuesday that its warships would deliver aid to Georgia’s port of Poti, which is under Russian control. The move could mean US and Russian forces coming face-to-face.

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Earlier, the head of European security organisation, the OSCE, Alexander Stubb, accused Russia of trying to empty South Ossetia of Georgians.

Speaking to the BBC’s Europe Today program, he said: “They are clearly trying to empty southern Ossetia from Georgians, which I don’t think goes by any of the books that we deal with in international relations”.

A South Ossetian commander said many Georgian civilians had already left of their own accord, because they were scared of the guns.