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Monday's move could limit BP's scope to increase its own dividend and overshadow its 2010 results on Tuesday, when the company is expected to reinstate its payout, which it canceled at the height of its Gulf of Mexico oil spill last summer.

The vote against the TNK-BP dividend also comes a day before a London court is due to hear TNK-BP's lawsuit seeking an injunction against the BP-Rosneft deal.

The dispute is with shareholders in the AAR consortium -- which owns the other half of BP's Russian TNK-BP venture -- who have reacted angrily to BP's artic exploration deal with rival Rosneft, unveiled earlier this month.

AAR wants TNK-BP to remain the prime vehicle of BP's operations in Russia and Ukraine. Its case will be heard in London on Tuesday, when Rosneft also reports full-year results.

BP said it needed its Russian TNK partners' approval to form the Rosneft joint venture but added it was still some way off incorporating the unit, suggesting that an injunction might have little practical impact.

BP still hoped to settle the dispute amicably. "We will sort this out between us and them in due course," a spokesman said.

AAR's board voted to withhold the payment of TNK-BP's fourth quarter dividend which had been due in February. But such a cut should not in the short term preclude BP restarting payments, analysts said, as its finances are in robust shape and the dividend is only half the level it paid out pre-disaster.

The company sold off a big chunk of assets after the U.S. spill and its underlying earnings are underpinned by oil prices at around $100/barrel.

However, a long-term cut to the TNK-BP payout could limit BP's scope for raising its own dividend over time. It relies on the Russian joint venture for a quarter of its production, although high Russian taxes mean the company only gets 10 percent of profits from TNK-BP.

Beyond blocking the BP-Rosneft deal, the motives of the AAR partners remain difficult to fathom. They may want a piece of the action in the Arctic or concessions from BP, such as access to upstream ventures outside Russia.

They may also be seeking to maximize the value of their investment if it is ultimately to be folded into the Rosneft-BP partnership, banking and industry sources suggest.

Shares in BP were flat at 487.1 pence at 1134 GMT, broadly in the line with London's blue-chip FTSE index.

ARBITRATION

"It's not surprising the Russian partners are upset, it's going to be an issue for some time and it's not clear how it's going to be resolved," said Dougie Youngson, analyst at Arbuthnot Securities.

Monday's move could limit BP's scope to increase its own dividend and overshadow its 2010 results on Tuesday, when the company is expected to reinstate its payout, which it canceled at the height of its Gulf of Mexico oil spill last summer.

The vote against the TNK-BP dividend also comes a day before a London court is due to hear TNK-BP's lawsuit seeking an injunction against the BP-Rosneft deal.

The dispute is with shareholders in the AAR consortium -- which owns the other half of BP's Russian TNK-BP venture -- who have reacted angrily to BP's artic exploration deal with rival Rosneft, unveiled earlier this month.

AAR wants TNK-BP to remain the prime vehicle of BP's operations in Russia and Ukraine. Its case will be heard in London on Tuesday, when Rosneft also reports full-year results.

BP said it needed its Russian TNK partners' approval to form the Rosneft joint venture but added it was still some way off incorporating the unit, suggesting that an injunction might have little practical impact.

BP still hoped to settle the dispute amicably. "We will sort this out between us and them in due course," a spokesman said.

AAR's board voted to withhold the payment of TNK-BP's fourth quarter dividend which had been due in February. But such a cut should not in the short term preclude BP restarting payments, analysts said, as its finances are in robust shape and the dividend is only half the level it paid out pre-disaster.

The company sold off a big chunk of assets after the U.S. spill and its underlying earnings are underpinned by oil prices at around $100/barrel.

However, a long-term cut to the TNK-BP payout could limit BP's scope for raising its own dividend over time. It relies on the Russian joint venture for a quarter of its production, although high Russian taxes mean the company only gets 10 percent of profits from TNK-BP.

Beyond blocking the BP-Rosneft deal, the motives of the AAR partners remain difficult to fathom. They may want a piece of the action in the Arctic or concessions from BP, such as access to upstream ventures outside Russia.

They may also be seeking to maximize the value of their investment if it is ultimately to be folded into the Rosneft-BP partnership, banking and industry sources suggest.

Shares in BP were flat at 487.1 pence at 1134 GMT, broadly in the line with London's blue-chip FTSE index.

ARBITRATION

"It's not surprising the Russian partners are upset, it's going to be an issue for some time and it's not clear how it's going to be resolved," said Dougie Youngson, analyst at Arbuthnot Securities.

More than 100 people have been killed during six days of protests in Egypt aimed at toppling President Hosni Mubarak.

A wider conflagration in the region could threaten the flow of oil at a time when policymakers in emerging markets are already bedeviled by high food and fuel prices and some developed economies are gaining momentum.

"To the extent that the instability continues, investor reaction will most likely push oil and Treasury bond prices higher, and global equities lower." Mohamed El-Erian, co-chief investment officer at bond giant PIMCO, told Reuters.

"The situation in Egypt is very fluid."

For now, investors watched closely for any sign of growing instability in the Middle East. U.S. S&P 500 futures were up 0.2 percent after Wall Street closed down 1.8 percent on Friday, while U.S. Treasury futures were flat on the day.

The U.S. dollar, yen and Swiss franc, which all gained on Friday in reaction to the escalating Egyptian situation were largely stable, with protesters in Cairo camped out and calling for Mubarak to step down after 30 years of rule.

The prospect of more expensive energy bills in high growth emerging markets added to unease about rising inflation among investors, who had last week pulled money out of developing equity markets for the first time in more than a month.

Emerging Asian currencies, down broadly on Monday, will be tested this week ahead of Lunar New Year holidays, with focus on inflation data from Indonesia, South Korea and Thailand due on Tuesday.

Japan's Nikkei share average .N225 was down 1.2 percent, at one point hitting its lowest since early December 2010.

Japan's biggest gas and oil developer Inpex Corp (1605.T) gained 2.7 percent in heavy trade, becoming the second biggest gainer on the Nikkei.

The MSCI Asia Pacific ex-Japan stock index .MIAPJ0000PUS fell 1 percent, with selling scattered across the consumer discretionary, industrial and materials sectors.

Stocks in Indonesia and the Philippines were the hardest hit, with benchmark indexes falling 2.1 and 2.6 percent, respectively. These markets were among last year's biggest gainers in Asia and the latest bout of risk reduction has made investors more willing to take profits.

Egyptian markets and bankers were shuttered on Monday.

OIL HEADS TO $100