The battle over the future of TNK-BP, the Anglo-Russian oil giant, took a fresh twist yesterday over the company's dividend payment.

The company said that management had recommended almost halving the dividend for 2007 to $2.6 billion (£1.3 billion) from $5 billion in 2006, despite a 25 per cent increase in net operating profits.

The move surprised analysts and prompted speculation over new divisions within the joint venture between BP and a group of Russian businessmen.

Each side owns 50 per cent of TNK-BP, which has traditionally paid some of the highest dividends among Russian oil firms.

Russia's third-largest oil producer gave no explanation for the proposed dividend cut, which must be approved by its board.

But it comes at a time of heightened friction between BP and its Russian partners, which are under intense pressure from the Kremlin to transfer control of TNK-BP to Gazprom, its state-owned rival.

TNK-BP International, TNK-BP's parent company, reported net profits of $5.3 billion for 2007, down from $6.63 billion in 2006. However, the 2006 figure was inflated by income from the sale of Udmurtneft, an oil production unit, for $2.92 billion after tax.

Without those proceeds, net profit last year was 25 per cent higher than in 2006. TNK-BP said that revenues rose from $35.5 billion in 2006 to $39billion last year.

Vladimir Putin, the Russian Prime Minister, waded into the row at the weekend, saying that he had warned the two sides against establishing a 50-50 partnership.

“When they did it, and I was present when they signed the papers, I told them: 'You shouldn't do it. You should decide between the two of you who will have a controlling stake. And we don't mind if you want BP to have it. We would, of course, like to see the Russian side, TNK, as the main shareholder. But somebody has to be in charge',” he told Le Monde during a visit to Paris. “They told me, 'No, we will always be able to work out an agreement' ... Now they have problems. They constantly have frictions regarding this matter, which one of the two companies is in charge.”

The Russian shareholders, who include the billionaires Viktor Vekselberg, Mikhail Fridman, German Khan and Len Blavatnik, boycotted a board meeting in Cyprus last week after BP rejected their demand to remove Robert Dudley, TNK-BP's chief executive.

They accused Mr Dudley, who has led the company since 2003, of serving only BP's interests. Jean-Luc Vermeulen, an independent director, resigned after admitting that he could not reconcile the two sides.

TNK-BP has also been the target of investigations by the Russian Federal Security Service (FSB), and the Interior Ministry.

The FSB has raided BP's Moscow offices twice and searched TNK-BP's headquarters after arresting a Russian employee for alleged industrial espionage.

The Interior Ministry announced that an executive with TNK before its link-up with BP was under investigation for evading nearly $1 billion in taxes.

Artyom Konchin, a UniCredit analyst, said that the dividend proposal highlighted differences within the company. “It is quite understandable that the Russian shareholders focus on high dividends, while BP wants to channel [funds] to development.”

Anglo-Russian giant

1.6m
barrels of oil produced on average per day in 2007

65,000
employees mostly located in eight production centres in Russia and Ukraine

1,600
filling stations

18%
of Russia’s total oil production

5
refineries

Source: Times archives

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