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Oil giant BP and its Russian partners have ended their row over joint venture TNK-BP by agreeing a new structure and replacing chief executive Robert Dudley.

BP and the four Russian oligarchs who, through investment firm AAR, own a 50 per cent stake in the oil exploration venture have agreed to replace Robert Dudley with a chief executive both sides can agree on. Mr Dudley will leave before the end of the year.

The agreement also includes an option to sell up to 20 per cent of a subsidiary of TNK-BP through an initial public offering (IPO) on the international financial markets.

The main board of TNK-BP will be downsized to four representatives each from BP and AAR, together with the three new independent directors in a bid to defuse future disagreements.

The four Russian oligarchs who own half of the oil exploration joint venture with BP have been lobbying for Mr Dudley's removal for months.

BP chief executive Tony Hayward said: "A transparent, responsible approach to governance will be a critical factor in the appeal of TNK-BP to potential future investors, if the company is to be fully valued on the financial markets."

The disagreement descended into accusations of state interference from BP, after BP's British staff struggled to get visas from the government.

The Russian shareholders retaliated with accusations that Robert Dudley was mismanaging the venture and running it solely for the benefit of BP.

Mr Dudley was eventually forced to leave the country but continued to run the operation from a secret location.

Recent developments saw the resignations of the venture's chief financial officer James Owen and head of downstream operations Anthony Considine in August.