British oil company BP took a further step towards closer ties with Russian state oil company Rosneft on Tuesday as the partners in its existing venture in the oil-rich country dropped their opposition to the tie-up.

AAR, the holding company of a group of Soviet-born businessmen, and BP, said they had agreed to end the legal battles that have paralysed BP's attempts to cosy up to Rosneft.

The long-running dispute softened last month as both parties decided that divorce was the best solution - both agreeing to sell their jointly owned business, TNK-BP, to Rosneft in a $55 billion transaction.

The deals will make Rosneft the dominant producer in the world's number two oil exporting country and give BP a 19.75% stake in the enlarged state-run company.

Until now though, BP has been unable to discuss any other kinds of co-operation because of an ongoing legal wrangle taking place in London.

Now it will be able to discuss secondment of BP engineers, exploration projects, and other co-operation deals with its new partner.

"Today's agreement allows both AAR and BP to move forward and focus on the future," said David Peattie, head of BP Russia.

"BP will be able to concentrate on the sale of our interest in TNK-BP to Rosneft and on working more closely with them as we develop the next stage of BP's long involvement in Russia."

AAR CEO Stan Polovets described the settlement as a "win-win" for both parties.

"The settlement enables BP and AAR to focus on issues that are most important at this stage - closing our respective transactions with Rosneft and ensuring that TNK-BP continues to operate at world class levels during the transition period that lies ahead."

Two people with knowledge of the situation said that BP had made a payment to AAR to ease the process. Neither BP nor AAR would comment on the size of any payments.

Both BP and AAR agreed last month to restore the normal functioning of the board at TNK-BP, marking a first step towards de-escalation of a long-running shareholder dispute.

"BP and AAR, joint shareholders in TNK-BP, today announced that they have reached a comprehensive agreement to settle all outstanding disputes between them, including the current arbitrations brought by each against the other," said a statement released by both companies.