BP left exposed as Russia warns of sanctions over Ukraine

The loan comes after a threat by Russian president Vladimir Putin to hit back at Western oil and gas companies. “The Russian government has already proposed some retaliatory steps. I don’t consider these necessary. But if this continues, we will have to ask who is working and how in key sectors of the Russian economy, including energy,” he said.

The warning leaves BP with the invidious choice of putting more money at risk to show goodwill or trying to extricate itself and risking the wrath of the Kremlin. “It looks as if BP is taking out a hedge against retaliatory action,” said one banker.

Rosneft is the biggest traded oil company in the world, producing 2.5m barrels of crude and paying $75bn a year in taxes to the Russian state. The company’s spokesman, Mikhail Leontyev, said there was no truth to reports that it was facing trouble refinancing loans. Rosneft has slashed its debt by $10bn to $44.5bn since the BNK-BP deal and has a cash reserve of $20bn.

Russian banks, companies, and state bodies have $712bn of foreign debt, mostly in dollars. They must refinance an estimated $10bn a month. Chris Weafer, from Macro Advisory in Moscow, said the market has been shut since the crisis began. “Very little is rolling over. We are close to the point when the state’s Reserve Fund will have to step in to avoid the first defaults.”

Mr Weafer said the fund has $40bn to $50bn available for such contingencies. Russia’s foreign reserves have fallen by $50bn to $470bn since February if swap contracts are included, but are still ample.

A report by Fitch Ratings said Russia could muddle through for 12 to 18 months if the global market stays shut, with only six companies out of the 55 it covers facing potential trouble this year.

Mr Weafer said the risk is a return to late Soviet-era stagnation if the country remains cut off from foreign funding for long. Investment and Western technology is badly needed just to keep oil and gas output from falling, let alone for complex drilling in the Arctic “High North”.

Russian banks are heavily exposed to Ukraine where the risk of default lingers despite a $17bn bail-out package agreed by the International Monetary Fund, with an immediate payment of $3.2bn this week.

The controversial package offers no debt relief for Ukraine and imposes strict austerity measures that risk further inflaming the crisis on Ukraine’s streets. The country is already in depression.

The IMF tranches are “front-loaded” to help cope with the emergency, in stark contrast to past bail-outs when it demanded strict compliance from Kiev first. The fund said with studied understatement that Ukraine may need extra money if the country breaks apart, losing its industrial core in the east.

The IMF is in a delicate position. It is has agreed to lend eight times Ukraine’s quota – far more than normal loan packages – to a provisional government in what amounts to a civil war. It is acting as a financial fireman for what could appear to be Western strategic interests, though China has endorsed the bail-out. “This programme does have risks,” said the IMF’s managing-director, Christine Lagarde.

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