Dancing with the Russian bear can be dangerous to your wealth. Nobody knows this better than Lord Browne of Madingley, chief executive of BP. He's already lost one fortune through the encounter.

Once bitten, twice shy, you might have thought, but on the basis that Russia was becoming one of the biggest oil and gas producers in the world and BP therefore couldn't afford not to be there, Lord Browne hopped straight back into bed with the very same oligarchs who had ripped him off first time around.

His second bite at the cherry - TNK BP - has thus far proved an altogether more advantageous one. In just three years, BP has had all its original capital investment of $8.5bn (pounds 4.5bn) back in dividends and asset sales.

Yet BP still owns half the company and if the Kremlin is indeed hell bent on expelling the foreigner in its efforts to reestablish control over Russia's energy assets, then this would knock a mighty hole in BP's reserves and profits. The Russian Government has already done it once with Yukos, since renamed Rosneft and floated on the London and Moscow stock markets. That was a special case, say apologists, as Yukos's founder, Mikhail Khodorkovsky, had evaded his taxes and in a very public way had attempted to set up a state within the state by bribing the Russian Duma.

Unfortunately, the evidence of the past month suggests that it perhaps wasn't as much of a one off as presented. With the chorus of "what about the grey whale" echoing in its ears, the Russian government's natural resources ministry has now formally withdrawn an environmental permit for the pounds llbn (pounds 5.8bn), Royal Dutch Shell-led Sakhalin-2 development in north-eastern Russia. That the grey whale would fare better in Russian hands than those of Shell seems rather doubtful, but of course everyone knows the withheld permit has got nothing to do with the environment.

Instead it's about money, as these things usually are, and in particular about the terms on which Shell and others originally went into Sakhalin in the late 1990s. Even then, with the oil price flat on its back and Russia desperate for foreign investment following default on its overseas debts, the deal looked a giveaway. Today the terms of Shell's production sharing agreement seem like outright theft from a Russian point of view, never mind that we in the West tend to regard a contract as a contract. The trouble with Russia is that it has yet to learn these niceties of the capitalist system.

The negotiatingpoint is around an asset swap that Shell had been planning with Gazprom, the state-controlled Russian gas company. The idea was that Shell would give up part of its Sakhalin-2 spoils in return for a stake in Gazprom assets elsewhere.

Gazprom yesterday formally withdrew from these negotiations, but presumably the door would be open again together with the promise of the environmental permit if Shell was prepared to given ground on what's swapped for what. What is plain, as this column has been warning for some years now, is that in matters commercial, the Russians cannot be trusted.

These are the wild eastern frontiers of capitalism where despite Russia's attempts to join the modern world the rule of law has yet to be properly recognised. Anyone with any understanding of Russian history, with its tradition of arbitrary, authoritarian government, would know the dangers. The potential rewards are vast, but the risks daunting.

Nobody is yet suggesting that Russia would attempt to sequestrate BP's interest in TNK BP. By deliberately not going the production- sharing route, where past agreements may be open to interpretation, but instead investing directly in a Russian oil company, Lord Browne seems to be on somewhat firmer ground. His partners can sell at the end of next year should they wish. The last thing BP would want to do is buy them out, even if the Kremlin said it was allowable. Rightly, Lord Browne figures that his best defence is for TNK to be seen as Russian controlled.

As the state moves to assert control over strategically important assets, the most likely buyer would be Gazprom. Would Lord Browne feel any more comfortable with such a partner? Possibly yes, as snuggling up to the state is part of the price that must be paid for practising business in Russia.

It might also help with other projectsBP has in common with Gazprom in this energy rich land. That was certainly the thinking behind BP's support for the Rosneft flotation. Whether Shell's notable absence from the list of share buyers in Rosneft has had any bearing on current events is an interesting question, but if you chose to dance with the Russian bear, you must expect to keep sweet talking him even when he's trampling all over your feet.

Funnily enough, BP is proving rather better at negotiating the realpolitik of Russian business than it is in the US.

Virtuously abstaining from all political donations in the US may have won BP brownie points with the ethical investing brigade - if that is indeed possible for an oil company - but it has done the company few favours in its hour of need on Capitol Hill, where such payments are regarded as routine. As the list of US disasters pile up, BP has found itself almost entirely friendless on the other side of the pond. I doubt Lord Browne is making the same mistake out east.

British Energy: yet another setback

The Treasury must be wishing it had offloaded its 65 per cent stake in British Energy when it had the chance early last summer. With every passing day, the value of its holding in the remnants of Britain's nuclear power industry gets lower. Given the uncertainties, it seems ever more unlikely that the public offering planned for the Autumn can take place.

Not only are wholesale electricity prices falling again, but the company seems to be in a state of more or less perpetual retreat on its output targets. Further problems with boiler tubes at Hunterston and Hinkley Point mean both these plants will be out of action for a good deal longer than anticipated.

The upshot is that the output target is being reduced for the second time in little more than a month. One of the characteristics of nuclear power generation is high, fixed-operating costs. To remain economic, nuclear power plants must maintain as high a load factor as possible. The longer the "outages" the more damaging it is to the bottom line.

The bull case for British Energy lies in the perceived scope for improvement in such outages.

Years of underinvestment, in combination with the need to maintain the largely obsolete technology of the company's Advanced Gas Cooled Reactions (AGRs), means persistent plant closures. Get these under control, and output should rise accordingly. Yet on the present evidence, such improvements are proving harder to achieve than anticipated.

This in turn makes it more difficult for directors to decide on a dividend policy, for with repeated outages, it is impossible to know how much free cash they will have to play with. On top of this has come the spectacle of lower electricity prices.

The Government gained its present shareholding in British Energy as part of a complex rescue a few years back which saw the taxpayer assume liability for the company's pounds 5bn of decommissioning costs.

Even a few months ago, the amount the Treasury would have raised by selling these shares would have been sufficient to cover these costs, on present estimates at least. That is no longer the case. If the Government were to sell in the capital markets at the present share price, it would be left with a net liability.

Should ministers delay in the hope that Bill Coley, the chief executive, and his team can eventually get their act together? Or do they risk political outrage by selling the whole thing to Elec- tricite de France, which would be only too happy to take the company off the Government's hands at a premium? It's a tough call.

What is plain, as this column has been warning for some years now, is that in matters commercial, the Russians cannot be trusted

j.warner@independent.co.uk