THE latest revelations by Bula Resources are quite bizarre. If the events were not capable of inflicting a monetary wound, they could be viewed with some amusement. But they have serious consequences for Bula which, if not sorted out, will cost its shareholders heavily.

Investors, particularly exploration companies, tend to view new territories, usually far away from the domestic market, with rose tinted glasses.

One such area, Russia and its former satellites, has been seen as an area with vast opportunities. Those vast resources could benefit from Irish management and finance, as Russia moves into the entrepreneurial mould, or so the argument goes.

The problem is that such liaisons with budding Russian entrepreneurs are risky. Investors should have been alerted to the imminent problems at the last annual general meeting, in August, when none of the four Russian directors turned up for the meeting.

Shareholders knew that Bula had been unable to proceed with its option, from the Russian Corporation, to acquire 51 per cent of Ati Otyr, a company whose main assets are licences to produce oil from a number of oil fields in western Siberia. The looming problem was the uncertainty over legal titles. Worse, the company had paid out £3.6 million for the stake and agreed to issue 90 million new Bula shares to the seller.

Chairman and managing director, Mr Jim Stanley, tried to allay the concerns of shareholders by telling them that the problem in Russia would be resolved "way before the end of the year".

Well last week, eight months later, the penny dropped for Bula shareholders. They were told, in a long and complicated statement, that unless direct negotiations with Ati Otyr, were successful, Bula would have to write off £8 million, representing the acquisition costs in respect of Aki Otyr.

These comprise a cash payment of $5.57 million (£3.5 million) and the issue of 90 million new Bula shares.

Bula now finds itself in a bizarre situation. It is in legal dispute with Russian Corporation which is represented on the Bula board by two Russian executives, Mr Alexander Marichev and Ms Tatyana Kirillova.

They have been asked to resign but have refused. Bula is now asking its shareholders to sack the two.

The question of title is also quite bizarre. It runs like this.

. Prior to signing the option, Bula got legal advice that Russian Corporation was the registered owner of 51 per cent of Aki Otyr and that these shares had 51 per cent of the voting rights.

. Subsequent legal advice said Russian Corporation did not have voting rights over 22.25 per cent of Aki Otyr as this block was not paid for.

. A Russian court, in January, ruled that as the payment was not made, the agreement to allow Russian Corporation to buy 51 per cent of Aki Otyr was cancelled.

. In February, Aki Otyr shareholders at an e.g.m. decided that Russian Corporation was not entitled to exercise any voting rights over the 51 per cent of Aki Otyr.

. Russian Corporation then alleged, to Bula, that the e.g.m. was invalid.

When the uncertainty arose over the title to the Aki Otyr shares, Bula decided to put 71.9 million of the 90.3 million new Bula shares into escrow.

Russian Corporation has sued for these shares to be released. Bula has counter sued and is taking action over a number of other heads.

In a lighter mood, during the two hour a.g.m. last August Mr Stanley told the shareholders that good dollops of vodka helped oil the wheels of business in Russia, noting that teetotallers would not have survived.

"If I did not participate I would not get the deals," is how he put it. That may put the perception of doing deals in Russia in a humorous light.

However, Bula faces a write off of £8 million which would gobble up the proceeds from the three last share issues. That might not be necessary if a successful deal is arranged with AkiOtyr.

The Bula 1994 document on the option to acquire 51 per cent of Aki Otyr contained the routine warnings on the operational, political and legal risks involved.

In order to "reduce the risk profile", it said it would rely on the "experience of the proposed (three) directors". Bula is now seeking to oust two of those directors.

It is pretty obvious, particularly for companies trying to generate new business in Russia, that those warnings of risks, are as valid today as they were then.