Arbitrator Blocks BP/Rosneft Deal

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A Swedish arbitration tribunal on Thursday blocked the controversial $16 billion share swap between BP, Europe's second-largest oil company, and OAO Rosneft, Russia's largest oil company, presenting a major obstacle to the proposed partnership that was to see the two oil giants work together to explore for oil in the Russia area of the Arctic Circle.

The decision by the tribunal also extends an injunction won by TNK-BP, BP's joint Russian venture with oligarch investors, earlier this year. TNK-BP, Russia's third-largest oil producer, claimed the BP/Rosneft deal violated the venture's shareholder rights agreement with BP.

BP (BP) still wants to get the deal done, but the options for dealing with TNK-BP on this front going forward are not attractive. TNK-BP can now either muscle their way in on the Rosneft tie-up, pressure BP for rich compensation or prevent the U.K. major from completing it altogether, according to the Wall Street Journal.

As part of the proposed deal with Rosneft, BP would sell 5% of itself to the Russian firm for $7.5 billion. When the deal was announced in January, it was viewed as a victory for BP CEO Bob Dudley because Russian oil giants have previously been unwilling to partner with Western oil majors to explore the Arctic region.

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