Oil and gas producer BP reported a sharp rise in second quarter profits yesterday but warned that further Western sanctions on Russia could harm its business there and its relationship with Russian state oil company Rosneft.

BP said that to date, the sanctions had not had a significant effect on its business in Russia, where it makes about a third of its crude oil output, but that could change.

“If further international sanctions are imposed on Rosneft or new sanctions are imposed on Russia or other Russian individuals or entities, this could have a material adverse impact on our relationship with and investment in Rosneft, our business and strategic objectives in Russia and our financial position and results of operations,” it said.

BP has repeatedly said it will stand by its investments in Russia since Moscow’s intervention in Ukraine, where pro-Russian rebels are fighting government forces in the east. But things could get harder as the EU weighs a new set of punitive measures against Moscow in response to the downing of a Malaysian airliner in eastern Ukraine.

Additional sanctions could include financial restrictions and a ban on exports to Russia of equipment for use by oil and gas producers.

For the second quarter, BP said underlying replacement cost profit rose to $3.6 billion, up 36 per cent from a year earlier, beating analysts’ forecast of $3.49 billion.

Its share of profits from Rosneft topped $1 billion in the quarter, nearly five times higher than a year earlier as a result of “favourable foreign exchange effects” with the Russian rouble. It also received an annual dividend of $690 million from Rosneft in the last two weeks.

The robust results were underpinned by good production performance from new and recently started higher-margin upstream projects as well as increased processing of heavy crude oil by the newly modernised refinery at Whiting, Indiana, in the US. BP maintained its quarterly dividend of 9.75 cents per share.