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UPDATE 1-Russia's Putin: Mixed feelings over Rosneft-BP alliance

NOVO-OGARYOVO, Russia, Oct 25 (Reuters) - Russian President Vladimir Putin said on Thursday he had ``mixed feelings'' about Rosneft's cooperation with BP, after the state oil major Rosneft announced a $55 billion takeover of Anglo-Russian oil firm TNK-BP.

Putin said that, although the deal ran counter to efforts to constrain the state's role in the Russian economy, he backed it because of a shareholder conflict between BP and the billionaire co-owners of Russia's No.3 oil firm.

``The government and I had mixed feelings when this project came up,'' Putin told a meeting with foreign analysts and journalists at his residence outside Moscow.

In the deal, announced on Monday, Rosneft will pay $27 billion in cash and stock to buy BP's one-half stake in TNK-BP. BP will then plough $4.8 billion in proceeds back into buying Rosneft stock and will end with a stake of nearly 20 percent.

Rosneft has also reached an outline deal with the four Soviet-born tycoons that own the other half of TNK-BP - Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik - to buy out their stake for $28 billion in cash.

``The fact that a company with state participation was increasing its market share at the expense of its foreign partner was a minus,'' Putin said, in televised remarks.

He said that the sale by the billionaires was made on their own initiative. BP's presence as a minority shareholder with seats on the Rosneft board would help boost transparency, Putin added.

BP paid $8 billion for a one-half stake in TNK-BP in 2003 and, factoring dividend payments of $19 billion it has received since, stands to make a total of nearly six times its original investment.

Putin cautioned at the time of the original deal that the 50-50 partnership structure might not work, and repeated that line on Thursday, saying: ``They did not agree, they did not solve their issues and all their work went from one conflict to another.''

Rosneft's takeover of TNK-BP, which is expected to close in the next six months subject to regulatory approvals, would create the world's largest publicly listed oil company with oil equivalent production of 4.6 million barrels per day.