Putin Backed Oil Deal To End Partners' Conflict

President Vladimir Putin said his government had "mixed feelings" over a major takeover announced last week by the Russian oil giant OAO Rosneft of a energy venture half owned by BP PLC, but said he approved it partly to resolve a prolonged conflict in the venture between BP and its four Soviet-born shareholders.

At a dinner Thursday with a group of academics and journalists at his official residence just outside Moscow , Mr. Putin said the proposed takeover of the TNK-BP joint venture gave his government pause because it would require a state company to boost its spending to take over a private enterprise.

"It's not in line with our trend toward containing the growth of the state sector," Mr. Putin said in his first extensive comments on the deal.

Under the proposed deal, BP would end up with $12.3 billion of cash and a nearly 20% stake in Rosneft, while the four tycoons would receive about $28 billion for their 50% stake in TNK-BP.

He said a key factor in the decision to allow the deal to go ahead was the shareholder conflict. "Sometimes they were fighting each other with bare hands," Mr. Putin said.

He said he had warned the then-Prime Minister Tony Blair when they signed the joint-venture deal in 2003 that a 50-50 split wouldn't work because no one would be in overall control. "It went from one conflict to another," he said.

In the end, both BP and the oligarchs wanted to sell their stakes, he said. "BP asked us for help repeatedly," Mr. Putin said. "We tried not to intervene in corporate disputes, but when BP came to me and told me they would like to cooperate with Rosneft, we couldn't refuse them."

He said BP's stake in Rosneft also means the deal "is a privatization of sorts. This is the entry of a foreign private company into a Russian state company." This would add stability to Russia 's largest company, he said.

Mr. Putin's explanation of the deal negotiated by his long-term ally Igor Sechin, Rosneft's chief executive, didn't convince everyone. Some Russia specialists said the agreement fits with the Russian leader's push to extend state control over key sectors of the economy and society.

Angela Stent, a Georgetown University professor, said Mr. Putin's explanation was "disingenuous."

The dinner, an annual event organized by the so-called Valdai Discussion Club since 2003, followed three days of discussions among Russian and foreign academics and background meetings with senior Russian officials.

Many of these academics suggested that momentum toward economic and social reform in Russia had stopped or reversed since Mr. Putin returned to the presidency this year. Participants described the Russian economy several times as an exporter of "energy, capital and people."

Mr. Putin became most animated when asked about the jailing of three members of the Pussy Riot punk collective.

He likened the group to the producer of an American video that insulted Muslims, who was jailed last month in California for allegedly violating his probation.

Pussy Riot "violated the feelings of our religious community," he said. "Why don't you support the man in the U.S. who's in prison for making a movie about Muslims?"

He said the Russian state had a special responsibility to protect its citizens' religious sensitivities because thousands of priests were massacred in Soviet times.

"If you in your country like to destroy the morals of your society, you can do that, but that has nothing to do with Russian society because we highly cherish what we have," he said.

Mr. Putin was asked at the two-hour dinner what he would like historians to record about his period in office.

He said he didn't think about the issue, and said he had a pragmatic view.

He described how the economy had grown, the country's foreign-exchange reserves had expanded and the birthrate had increased since he first became president in 2000.

Andrew Kuchins of the Center for Strategic and International Studies in Washington , said that, though he was given the opportunity, Mr. Putin outlined "no vision for what he wants to do in his third term in office."

Cliff Kupchan of the Eurasia Group consultancy said Mr. Putin "again explained his future vision in terms of his past achievements."