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As the Deepwater Horizon crisis continues, new chief executive Bob Dudley battles to turn the oil group around Bob Dudley, chief executive of BP, will face hostile shareholders on Thursday and, barring an 11th-hour breakthrough, the humiliating prospect of his controversial proposed alliance with Kremlin controlled oil company Rosneft collapsing. It was reported late on Wednesday that BP had broken off talks to buy out its Russian partners, the oligarchs who make up AAR and stand in the way of the Rosneft alliance being consummated. It is thought that AAR demanded too high a price for its 50% share in the joint venture TNK-BP in return for not blocking the alliance. A source close to AAR said: “It is up to BP to make a sensible proposal to get out of the mess it has created.One has not been forthcoming… They [BP directors] now face the consequences of their actions.” BP and AAR declined to comment. Almost a year on from the Deepwater Horizon accident in the Gulf, the present situation hardly represents the turnaround that Dudley, or BP, had hoped for. Dudley took the helm on 1 October, after his predecessor, Tony Hayward, paid the price for what is officially the world’s biggest offshore accidental oil spill. Less than four months into the job, Dudley announced an audacious proposal to transform the fortunes of BP , looking not west to the US but east: a $16bn share swap with Rosneft – the first of its kind between an oil major and a national oil company – to cement a new joint venture to explore the Arctic. BP has had its fingers burnt in Russia before. In the late 1990s, it lost out in a dispute with AAR. The two sides made up to eventually form TNK-BP, the Russian joint venture at the heart of the impasse over the proposed Rosneft deal. Last month an independent arbitration tribunal upheld an injunction , secured by AAR, which prevents the two companies consummating the deal. AAR had successfully argued that the Rosneft deal contravened the TNK-BP shareholder agreement, which requires BP to offer the joint venture first refusal over any business opportunity in Russia. Dudley claimed that AAR had been properly consulted on the deal when analysts queried him days after he had unveiled the Rosneft alliance. It soon transpired that AAR felt otherwise. But BP still looked secure, with the proposed Rosneft alliance seemingly having the blessing of the Kremlin. Rosneft chairman Igor Sechin was also deputy prime minister and in charge of Russia’s energy policy, a key player to have onside. At a dramatic Friday night press conference at BP’s St James’ Square headquarters in London in January, when the deal was announced, those listening in by phone overheard Dudley quietly thank Sechin, after his speech, for his “very nice words”. Dudley calculated that AAR would not dare to challenge the deal. The last oil oligarch to cross the Kremlin – Mikhail Khodorkovsky, ironically the boss of the dismantled oil company whose assets went to Rosneft – is still languishing in a Siberian prison cell. But Russian politics, particularly involving energy, are unpredictable at the best of times. Dudley, it seems, guessed wrong and BP is paying the price. To make matters worse, on Monday, Sechin quit his Rosneft post in a Kremlin reshuffle, leaving BP more isolated than ever. Iain Armstrong, analyst at stockbroker Brewin Dolphin, said: “It’s such a political misjudgment by Dudley. If it wasn’t for the fact that the chief executive position of BP is a poisoned chalice right now, he would be out. BP is lurching from one crisis to another.” BP’s two-month period of exclusivity with Rosneft – during which it was supposed to formally sign the alliance – expires on Thursday. It seems unlikely Rosneft would extend the deadline, which means it is free to seek other partners for the proposed deal. Now the tough negotiations will begin in earnest. All is not lost for BP however. It still has an advantage over other rivals wanting to become Rosneft’s partner, since the two companies have been in talks for years about exploring the Arctic. And AAR, which claims it wants to be involved in the Arctic exploration, would also lose out if BP was not able to form the alliance, whether through TNK-BP or not. But it is clear that if Dudley wants the deal to go ahead, he will have to cut a deal with AAR. It will not come cheap and could take weeks to negotiate. If BP cannot resurrect the Rosneft alliance, it will have little impact on the business in the short term. Exploration was not due to begin for several years and the chances of success are uncertain in any event. But it would be a major blow for Dudley, particularly as BP had championed the alliance as “historic” and an example for the rest of Big Oil wanting to team up with national oil companies to follow. Brewin Dolphin’s Armstrong says: “If the deal did not happen it would be a blow to Bob Dudley’s reputation. It would represent a setback for BP’s rehabilitation.” The Rosneft debacle is terrible timing for BP. The annual general meeting, at the ExCel centre in East London, was always going to be a stormy affair because of the Deepwater Horizon disaster. A protest by environmental activists is planned outside the conference centre before the meeting begins. Investors are also angry that the company paid bonuses to its finance director and head of refining last year, and about the £1m golden goodbye for Hayward. Big funds such as the California state pensions fund Calpers and Florida’s equivalent SBA, who own 0.4% of BP, as well as activist funds such as the Christian Brothers Investment Services group, will vote against the approval of BP’s report and accounts. The less environmentally and corporate governance-minded investors also have reasons to be unhappy. BP’s share price is still almost a third lower than it was just before Deepwater Horizon at a time when oil prices have surged and it lags behind rivals such as Shell. Hayward plots his City comeback Former BP chief executive Tony Hayward paid the price for the Deepwater Horizon disaster, leaving the company on October 1 last year. But he is already plotting his City comeback. He has been lined up as senior independent director of commodities group Glencore in its $60bn flotation. The role could be announced on Thursday when, as expected, Glencore formally fires the starting gun on the listing. Hayward is also reported to be setting up an oil and gas investment fund which could list in London through a £1bn flotation this year. Hayward was appointed as a non-executive director of BP’s Russian joint venture, TNK-BP, soon after he stepped down as BP chief executive. He joined just before the full-blown row erupted between BP and its Russian partners, who co-own the venture, over the proposed alliance with Rosneft. But even if it ends in tears for Hayward at TNK-BP, his wife Maureen could keep his BP association alive. She is reported to be writing a book in his defence of her husband, who was villified for such gaffes during the Gulf crisis last year such as “I want my life back”, and telling the Guardian: “The Gulf of Mexico is a very big ocean. The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume.” The comments were made in mid-May, when the official size of the spill was still estimated at 5,000 barrels a day. By the following month, it was increased to up to 40,000 barrels a day. BP is now contesting the official figures, which are likely to be one of the factors determining how much it will have to pay in fines. BP Bob Dudley Tony Hayward Oil and gas companies Russia Oil Oil Energy industry BP oil spill Pollution Oil spills Europe Tim Webb guardian.co.uk