Outlook There are two ways to look at the latest misfortune to befall BP's alliance with Rosneft. One is to say that Bob Dudley, chief executive of BP since the autumn, is making a pig's ear of his first six months in the job. The other is to reflect on where BP might be 10 years from now if, in the end, it can snatch victory from the jaws of defeat in Russia. And for the time being, it's not possible to say which of these alternatives ought to be the prevailing view.
A fortnight ago, it looked as if BP had made the breakthrough, after agreeing its Russian joint venture, TNK-BP, could take its place in the Arctic exploration it is planning with Rosneft. But while that satisfied AAR, BP's other half at TNK-BP, which was furious its British partner had been planning a big Russian adventure without it, Rosneft itself was not convinced. It had already warned it didn't want TNK-BP involved and was in no mood to change its mind. Now it is refusing to extend the deadline set for agreement.
There is no denying this leaves Mr Dudley with a great deal of egg on his face. No one at BP could have been better placed to anticipate how AAR would react to his alliance with Rosneft because Mr Dudley spent a long period running TNK-BP in Moscow before leaving the country when the relationship between BP and its Russian partners last went sour. Yet he seems to have utterly misjudged the determination of AAR to fight this one out – and he also overestimated the extent to which the Russian government was prepared to get involved to push the deal through.
That said, all is not yet lost. Mr Dudley is now pinning his hopes on further talks in the weeks ahead, crossing his fingers that private negotiations with Rosneft, to be held behind closed doors without the pressure of a looming deadline, might resurrect and consummate the deal.
Moreover, there are some good reasons to think those hopes will not be dashed. For one thing, sources close to the talks of the past few days say that an agreement was almost reached ahead of Monday's deadline, only for a last-minute technicality to come up.
BP, it would seem, has agreed to buy AAR out of TNK-BP at a price accepted by both sides, which would put an end to the impasse. The only outstanding issue is whether its share swap with Rosneft can proceed before that buy-out has completed. None of the parties have enough trust in each other to agree on that, so a legal solution protecting everyone's issues has to be found.
Moreover, while Rosneft is undoubtedly fed up with BP's inability to bring this agreement to fruition, it still needs a partner for the Arctic exploration. And while it has alternatives – some of whom have already begun registering an interest – the British company is not only bringing its technical expertise to the venture, it is also offering long-term faith and support in the form of the share swap. That's something its American rivals, for example, would struggle to match, given the politics back home, should Rosneft be tempted to switch to them.
In the context of the circumstances in which Mr Dudley took over at BP – relieving the accident-prone Tony Hayward of his duties – the easy option is to look at this episode as yet another slip-up from a company that has lost its grip. But it is worth keeping at least half an eye on the prize at stake: the Arctic fields in question are roughly the size of the North Sea. If BP's boss gets his hands on those resources in the end, he'll regard his current embarrassment as a small price to pay.
That's the charitable view. If the latest setback to the Rosneft deal proves terminal – and while BP thinks it is close to clinching its buy-out of AAR, its record of reading its Russian partners is dismal – Mr Dudley will face a difficult struggle to regain his authority. Maybe even an impossible one.