Shares in BP traded lower Friday, a day after an arbitration panel ruled against the oil company's planned $8 billion share swap and Arctic exploration deal with Russia's OAO Rosneft.
BP shares were down 0.9 percent at 477 pence in late morning trading on the London Stock Exchange.
BP and Rosneft had planned a joint effort to explore the Arctic seabed, but Alfa-Access-Renova, BP's partners in the Russian joint venture TNK-BP, objected.
AAR said all of BP's new business opportunities in Russia and Ukraine must be pursued through TNK-BP.
AAR won a preliminary order in a British court to block the deal, and Thursday's ruling by the Stockholm Arbitration Tribunal is binding.
The Rosneft agreement was the first major deal announced by BP Chief Executive Bob Dudley, who replaced Tony Hayward last October.
AAR slammed BP for its attempted link up with Rosneft.
"Willfully ignoring the provisions of the shareholder agreement was a serious misjudgment by BP that has severely damaged the relationship between the TNK-BP shareholders; it has also harmed BP's reputation in Russia," said Stan Polovets, AAR's chief executive. "We expect Bob Dudley to make every effort to rectify the situation and rebuild the trust that has been lost between BP, AAR and the management of TNK-BP."
The panel's decision is a blow to Dudley's plans for the company following last year's Gulf of Mexico oil spill.
Though BP already draws a quarter of its oil production from Russia, the Rosneft deal would have given it access to 125,000 square kilometers (48,000 sq. miles) of the South Kara Sea.
"BP has always been and remains, fully committed to investing in Russia," the company said in a statement released Thursday. "TNK-BP is BP's primary business vehicle in Russia and BP fully supports its strategy and investment program."
BP said it would seek a ruling whether it could go ahead with the share swap, which would give Rosneft a 5 percent stake in BP, and BP a 9.5 percent stake in Rosneft. However, AAR said the Tribunal's order barred BP from attempting that.
"The extension of the injunction may well affect sentiment towards BP today, and fuel fears over what concessions it may have to make in order to appease its TNK partners," said Richard Griffith, analyst at Evolution Securities.
"This could manifest itself in many ways including offering stakes in projects outside Russia, which the TNK partners had previously desired," Griffith said.