Oil major BP Plc said it would swap 5 percent of its shares, worth $7.8 billion, for 9.5 percent of Russia's state-controlled Rosneft , and the two companies would jointly develop offshore Arctic oil and gas fields in Russia.

U.S.-traded BP shares fell 1 percent to $48.70 in after-hours dealings.

Following are reactions from analysts and investors:

CLIFF KUPCHAN, DIRECTOR, EURASIA GROUP

Rosneft is well aware that its ability to do deepwater Arctic work alone is very limited. Russian oil companies in general are aware that their ability in the deepwater Arctic is very limited. They have been looking for ways to bring in companies with the technology and especially management skills needed to pull off deepwater Arctic work. What I see here is a Russian national champion consummating a deal with a trusted Russian partner to enter the next phase of Russian exploration and production.

Both major issues -- BP's insistence on expensive BP expats being employed by TNP-BP and BP's insistence that TNK-BP not work outside of Russia and thereby compete with BP -- have been resolved in favor of the TNK partners.

According to TNK and BP -- I've spoken to both recently -- they are extremely pleased with how the company is working. It has turned from a fistfight to a love fest.

The Arctic part of this is expected. The fusion of the sternum -- i.e., the share swap -- is a good bit further than I would have expected. There are benefits for both sides. For Rosneft, it's long-term access to Western technology and management skills. The management skills are absolutely essential, because they've never run these things before. For BP, it gives them long-term access to sizable reserves in a country that has been central to their operation.

PHIL WEISS, ANALYST, ARGUS RESEARCH

From what we know, it sounds like it's potentially good for BP.

There's always political risk when you deal with Russia -- you can't dismiss that. But BP's been in Russia for a long time. At least right now, this has Putin's blessing.

The size of the stake that BP has in Rosneft, it's 9 percent roughly. That's not enough that I get too concerned about it. I think the biggest thing is the political risk. But it seems like a good deal on both sides. BP gets access to resources, Rosneft gets access to expertise and knowledge.

MICHAEL CUGGINO, CEO OF PACIFIC HEIGHTS ASSET MANAGEMENT

AND A BP SHAREHOLDER

They've chosen to get into that part of the world to expand reserves and for future growth in production. So I don't know if this is something new, or just a recommitment to that strategy. The problem is they had a difficult time a few years ago.

It's true of any company doing business in emerging markets, I don't think it's just BP, I think it's just the reality. You have to choose the cost-benefits of going into unproven parts of the world, with less rules of law, with less property rights, with potential mixing of political and business interests. You have to weigh those risks versus the reward of the expansive reserves there, and the ability to make future profits and revenues due to being where the oil and the energy is.

One thing it maybe does also say is that what went on the Gulf last April is not getting in the way of them continuing to build their business and expand around the world, and I think that's a positive sign.

(Reporting by Braden Reddall, Ernest Scheyder, Michael Erman)

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