BP Russia venture in turmoil as tycoon CEO quits

Russian billionaire Mikhail Fridman on Monday resigned as chief of BP's Russian joint venture in a surprise decision that threw one of the British giant's most profitable operations into turmoil. The tycoon's departure as TNK-BP boss came just seven months after he had been confirmed to the post for two years following a bruising board battle between the venture's local and British partners. That strife had already forced BP to abandon its historic Arctic tie-up with the Russian state champion Rosneft and brought shareholder calls at BP for the resignation of the group's US chief Bob Dudley. But Fridman's confirmation by both TNK-BP's local and British owners appeared to put the dispute behind them and set Russia's number three oil firm on an even footing. TNK-BP kept its announcement of Fridman's resignation to just a few terse sentences that failed to explain his logic or the company's immediate plans. "Mikhail Fridman has submitted a letter of resignation to TNK-BP Ltd.'s board of directors, notifying his resignation from the position of chief executive officer of the TNK-BP Group." TNK-BP has had a turbulent history that reflects the trouble Western majors have had in making progress under the tough rules imposed during the 12-year domination of President Vladimir Putin. The firm is a cash cow that pays BP billions of dollars in dividends every year and is is responsible for about a quarter of the parent company's current output. But it also represents an incessant headache for BP because of both management wrangling and concerns over Russia's plans to establish still further control over the energy industry at the expense of private players. Fridman's resignation from TNK-BP came just a week after Putin's old energy czar and close confident Igor Sechin was put back in charge of Rosneft after holding a top ministerial post. His placement was followed by a quick flood of Russian press reports about Kremlin plans to consolidate the energy industry around Rosneft and possibly make it into an oil and gas super-giant that would essentially resemble a Soviet-era ministry. "Speculation has inevitably emerged that we may again be heading in the direction previously talked about to create an umbrella holding company in the energy sector... into which the state is more likely to inject its various existing holdings," said Chris Weafer of Troika Dialogue. But analysts appeared at an immediate loss to explain why precisely Fridman had resigned at this time or what future this spelled for BP's prospects. One unnamed Russian source told RIA Novosti that Fridman had been frustrated by the inability of the TNK-BP board to appoint independent directors who could help build the necessary quorum to make decisions. "BP has been unconstructive and aggressive," said the Russian source. Some noted that the other three Soviet-born tycoons who comprise the AAR alliance through which the Russians own their stake have also had difficult ties with BP. The other top shareholder tycoon German Khan may "try to consolidate his position, and while Fridman has been difficult at times with BP, in practice so has Khan," RBC Capital Markets said in a research note. Fridman's owns a 25-percent stake in TNK-BP -- second-largest after BP's 50 percent share -- and has yet to mention whether he intends to part with the holding. But both he and the other tycoons had previously entertained thoughts of selling their stakes to Rosneft in a move that would leave BP in a formal alliance with the Russian state.