WHITEHALL appears set for a major court battle with a Russian oligarch to stop his company operating a raft of gas fields in the North Sea, No 10 has signalled.

Mikhail Fridman, a billionaire businessman, this week clinched a £3.7 billion deal through his investment company, LetterOne Group, with German utility firm RWE to acquire Dea, its oil and gas arm, which includes 12 licences off the Scottish coast.

But the Department for Energy and Climate Change(DECC) has expressed fears that the Russian company could be affected if, in the EU's dispute with Moscow over the crisis in Ukraine, further economic sanctions were imposed on Russian firms.

A Whitehall insider claimed there would be "enormous" problems if this happened, suggesting all of the 12 fields in the North Sea acquired by LetterOne could be shut down with not only production implications but safety and environmental risks too.

LetterOne and RWE had sought to allay DECC's concerns by offering to keep Dea's British assets separate for a number of years and committing RWE to buy them back if either the EU or the US imposed sanctions on the LetterOne's Russian owners within a year after the closing of the deal.

But Ed Davey, the Energy Secretary, made clear that, after careful consideration, this proposal did not meet his concerns and said if the deal went ahead "in its current form", then he would be "minded to require the companies to arrange for a further sale to a suitable third party".

DECC acknowledged that the Secretary of State did not have the power to prevent the sale of Dea to LetterOne but a source stressed: "However following such a sale, the licences give the Secretary of State a power to require the new owners to sell the interests in the UK petroleum licences to another company that is acceptable to him."

The source added: "If that further sale does not complete within three months, the Secretary of State may revoke the licences."

LetterOne has pointed out: the UK is the only country opposed to the deal - the EU, Germany and Ukraine back it; that it would "seek judicial review" if Whitehall sought to block it and would pursue its "right to seek compensation for any damage caused to the value of our investment in RWE Dea".

On Monday, after the deal with RWE was clinched, Mr Fridman expressed his delight, saying: "We are convinced the current macroeconomic environment and low oil price give us an opportunity to achieve our ambition."

Mr Fridman, 50, is one of Russia's richest oligarchs and has stayed on good terms with President Vladimir Putin but has not, as yet, been a target of the West's sanctions against Russian firms and individuals over Ukraine.

While DECC declined to give an update on its position as it considers its options, Downing Street indicated that the matter over the Russian oligarch's purchase of the North Sea fields could be heading to the courts.

A spokesman stressed how the UK Government's position on the Dea sale to LetterOne had not changed and that there was a "legal procedure" to be gone through.

He explained how DECC had made clear before this week's sale that it would "require disinvestment of the assets in question" and stressed: "We are not at the end of the process."

The spokesman said there was still an opportunity for RWE and LetterOne to "follow the position" recommended by the UK Government, ie sell off the North Sea fields to a third party. "Should it not be so, you have a clear statement of our intent." He added: "The Government stands ready to act further."

LetterOne has pointed out how Dea has invested around £650m in the North Sea fields, which account for up to five per cent of UK gas production, and planned to invest a further £300 million in the next three years "in a province from which many companies are disinvesting".