BP defeated by Russian partners

BBC business editor Robert Peston on a setback for the oil giant

If you don't try, you can't fail - to coin the cliche.

But it is still embarrassing for BP that an independent tribunal has blocked its attempt to form a partnership - based on an exchange of shares - with the Russian energy giant Rosneft, and prohibited an associated agreement to explore the Arctic sea for oil.

The ruling of the tribunal, which upheld an injunction in the London courts, is comprehensive and clear, raising questions about why BP's new chief executive, Bob Dudley, ever thought the deal could happen.

Perhaps he calculated that because he was negotiating with a state-owned enterprise in Rosneft, the Kremlin would put sufficient pressure on the opponents of the transaction, the group of Russian billionaires - who we'll give the shorthand name of AAR, and who are the co-owners with BP of a massive Russian energy venture, TNK BP - to cease their frustrating action.

That does not appear to have happened. And a spokesman for AAR insists it won't happen.

He says that AAR is clear that the deal with Rosneft is so damaging to the intrinsic value of TNK BP, that BP will not be able to afford to buy off the billionaires.

We'll see.

In the meantime, BP will go back to the tribunal and ask it to permit the share swap - which would see BP increase its stake in Rosneft from just over 1% to just over 10%, while Rosneft would take a 5% stake in BP.

There seems to be a deadline of April 14 for some kind of way to be found through the impasse, because that's when the agreement-in-principle with Rosneft on the share exchange expires.

So what's the damage for BP?

Well an exciting opportunity to bond with the most important company in one of the world's most energy rich countries may have been lost.

And there is some reputational damage, in that the judgment of BP's senior management appears to have been flawed.

Also BP's relations with its TNK BP partners haven't exactly been improved - which is not ideal given that TNK BP is a cash spewing business with bags of potential worth tens of billions of dollars.

All that said, none of this needs to be a permanent loss. The final bill depends on how BP proceeds from here.

You can keep up with the latest from business editor Robert Peston by visiting his blog on the BBC News website.

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