Reporting from Washington — BP announced Friday that it was swapping stock with Russia's Rosneft in a deal that cements the troubled oil giant's ties to one of its most important countries.
BP said it was swapping 5% of its stock for a 9.5% stake in Rosneft.
U.S.-listed shares of BP climbed 3.6% on Friday in anticipation of the deal, valuing the BP stock being handed over to Rosneft at about $7.8 billion.
BP is already a key player in Russia's energy market through its 50% interest in TNK-BP; the country represented one-quarter of BP's output in the third quarter.
The deal will allow BP and Rosneft to jointly drill in the Arctic Ocean, as Rosneft controls three licenses that cover a significant chunk of the Russian Arctic continental shelf.
"This unique agreement underlines our long-term, strategic and deepening links with the world's largest hydrocarbon-producing nation," BP Chief Executive Robert Dudley said in a statement.
Igor Sechin, Rosneft's chairman, is also deputy prime minister of Russia, a reflection of the close ties between the country's energy industry and government.
"Global capital and Russian companies are clearly ready to invest in world-class projects in Russia, and Russian companies are quickly emerging at the forefront of the global energy industry," Sechin said.
BP was rocked by last year's spill in the Gulf of Mexico, and its problems have continued with a recent leak in Alaska.
The company's Russian venture has not been without controversy: Dudley was pushed out of his previous role running the TNK-BP venture in 2008 after angering TNK's Russian co-owners. He became chief executive of BP after his predecessor, Tony Hayward, was criticized for his handling of the gulf spill.
BP stock is down about 20% from where it stood before the spill, the worst in American history.
The company still faces intense scrutiny in the United States, with Rep. Edward J. Markey (D-Mass.) calling for the Committee on Foreign Investment in the United States to review the Russia deal, noting that BP is the top petroleum supplier to the U.S. military.
"BP once stood for British Petroleum. With this deal, it now stands for Bolshoi Petroleum," said Markey, the top Democrat on the House Natural Resources Committee.
Goldstein writes for MarketWatch.com/McClatchy.