Giant oil firm BP raised its stake in Russia's Sidanco to 25 per cent yesterday, renewing a once wavering commitment to one of the most important oil and gas nations outside the increasingly volatile Middle East.

BP said it had struck the $375 million deal with Access-Renova and Alfa Group, the majority owners of Tyumen Oil (TNK), and BP's sworn enemies until last year in a legal battle over Sidanco's assets.

BP paid $571 million for 10 per cent of Sidanco in 1997. Although small in terms of the $10 billion a year BP invests worldwide, yesterday's deal marks a new Russian vote of confidence by one of the world's largest and most profitable firms, and gives it more control over significant oil and gas production.

The agreement is also a feather in the cap for the corporate governance reforms of Russian President Vladimir Putin, and puts a new prop under a recent boom in Russian oil shares.

Nine per cent of the world's oil is produced in Russia and a third of its natural gas reserves reside there, but early post-communist attempts in the 1990s to involve Western investors proved prone to Western accusations of local cronyism and corruption.

BP now sees all that changing. "This purchase underlines BP's confidence in Russia and its improving business environment," said Chief Executive John Browne.

Alfa Group Chairman Mikhail Fridman said: "We view this transaction as an important step in developing our cooperation with BP, and as a signal of renewed investor confidence in Russia."

The investment spotlight on Russian oil has burned all the brighter in the West since the September 11 attacks in the United States ushered in fresh tension in the Middle East and raised questions over future supplies from that region. Only last week, Iraq tried to orchestrate an Arab oil embargo of the West to protest Israeli incursions into Palestinian areas.

For BP, the deal is an opportunity to make a fresh start with Sidanco, an investment that looked doomed two years ago after TNK took control of key Sidanco production asset Chernogorneft, in exchange for subsidiary debts.

BP considered abandoning the investment, but eventually fought back with the help of other Western creditors.

The dispute was settled in a complex deal last year, when TNK bought 84 per cent of Sidanco from Russian financial group Interros, while BP agreed to keep its stake and to manage Sidanco.

Now, with 25 per cent plus one share, BP has full blocking rights under Russian law against the kind of moves that caused its original troubles.

Sidanco is in full merger discussions with parent TNK so BP is likely to end up with a stake in TNK itself - its former arch enemy that controls a million barrels of oil a day of output, half as much as BP controls itself.

"This could be a first step to a bigger stake," said Peter Hitchens of French broker Cheuvreux. "They might not stop here. It's accretive to their production profile and gives them cheap reserves at less than $2 a barrel."

This compares with $6 a barrel paid by BP's rival Royal Dutch Shell for the reserves of Enterprise Oil in a deal announced earlier this month.

Investment vehicles Access-Renova and Alfa Group will retain a controlling stake in Sidanco after the deal with BP.

Sidanco produces some 380,000 barrels of oil and gas a day mainly in western Siberia, as much as many smaller Western companies, and compared with BP's own daily output of about two million. The deal should go some way to help BP meet its 5.5 per cent annual output growth pledge.

Meanwhile, BP said it was mulling more Russian investments, but would not quickly further up its stake in Sidanco or Tyumen Oil Co.

"I think it's too premature. Nothing has been ruled out, but so far we are not considering buying a stake in TNK or (further) raising our stake in Sidanco," Peter Henshaw, head of external relations for BP in Moscow, told journalists.

"However today's transaction still leaves room for a Sidanco and TNK merger (in the long term)," he added.