The state-controlled Russian oil firm Rosneft is reported ready to buy out a multi-billion dollar joint venture in Russia involving the British oil giant BP. The deal would create the world’s biggest listed oil company, bigger than Exxon Mobil or Shell.

The deal, if it goes ahead, could be good for both the Russian government and BP.

It would extend the Kremlin’s control over Russia’s energy resources, and further enhance the power of President Vladimir Putin. He would effectively command half of Russia’s entire oil output.

BP is thought likely to get a ten or fifteen per cent stake in the new, enlarged Rosneft and retain a foothold in one of the world’s most important energy regions:

“This would offer them prime mover-partner of choice status for most of Rosneft’s future dealings and future explorations,” says Nick McGregor, an oil analyst with stockbrokers Redmayne Bentley. “This could be enormous for BP.”

The deal could bring BP access to the untapped reserves in the Arctic. The company would also get shot of its joint venture partners, four Russian tycoons who have made life very difficult for the British company.

But getting into bed with the Kremlin has its dangers, says McGregor: “If that relationship proves equally fractious as the one they’ve had with these oligarchs in Russia, the Kremlin are an unforgiving bunch to fall out with, and BP could find itself effectively having jumped from the frying pan into the fire.”

BP could also receive more than ten billion in cash, and that could come in handy as the company braces itself for more fines and damages over the Gulf of Mexico spill.