Lukoil’s empire outside Russia begins to fall after US sanctions

The oil company’s operations outside Russia represent 0.5% of the oil produced daily around the world

Russian oil company Lukoil is facing increasing restrictions on its international operations.

The most complicated situations are in Europe, more specifically in Bulgaria, Romania and Moldova.

Lukoil owns the Burgas refinery, responsible for supplying 80% of the fuel consumed in Bulgaria. On Friday, the country’s parliament approved a law that gives the local government the power to choose a new administrator for the refinery, to take charge of its operations, to approve its sale or even nationalize it, if necessary.

While the legal issues remain unresolved, Prime Minister Rosen Zhelyazkov’s executive is asking the US for an exemption from the sanctions regime, similar to the one Viktor Orbán got for Hungary.

The US Treasury Department has given individuals and companies until November 21 to cut business ties with Lukoil or with companies in which the Russian oil company has a stake of at least 50%.

The situation in Bulgaria poses a high risk for the country. If the Burgas refinery closes, a scenario that is still on the table, Sofia would run out of fuel reserves “until the end of the year”, said Martin Vladimirov, an analyst at think tank europeu Center for the Study of Democracy.

Another problem that Bulgaria faces is the search for a buyer. The Burgas refinery is valued at 1.3 billion euros and, to Politico, a former Lukoil administrator acknowledged that it will be “difficult” to find a buyer willing to deal with the risks posed by the sanctions, as well as the high costs of maintaining operations.

In Romania, the problem is not so serious, but even so, the government in Bucharest has already said that it will evaluate any proposals for the sale of assets, in order to guarantee compliance with European Union regulations and safeguard the country’s energy security.

Lukoil owns the Petrotel refinery, which produces 20% of the fuel consumed in Romania.

Like Bulgaria, Moldova is also asking the US for a temporary exemption. According to the country’s Energy Minister Dorin Junghietu, Lukoil owns a significant number of fuel stations and is the owner of the only aircraft fuel storage, fueling and refueling facility at Chisinau Airport.

In northern Europe, in Finland, Teboil, owned by Lukoil, is already running out of fuel to supply its stations in the country, a company spokesperson confirmed to the Helsingin Sanomat newspaper on Friday, citing US sanctions as the cause of the shortage.

In the Middle East, the scenario for Lukoil is also not famous. This Monday, Reuters reported that the Russian oil company declared force majeure for not fulfilling its part of the contract to explore the West Qurna-2 oil well, which represents 9% – around 480 thousand barrels per day – of Iraq’s oil production.

The agency claims that since US sanctions were enacted, Iraqi authorities have suspended all cash and crude payments to the company. In a letter sent last Tuesday to the Iraqi government, Lukoil informed that, if the problems are not resolved within the next six months, the company will stop production and abandon the project.

The situation could escalate further globally. Lukoil’s operations outside Russia represent 0.5% of the oil produced daily around the world. The oil company holds important percentages in gas and oil exploration in Kazakhstan, Azerbaijan, Uzbekistan, as well as in Mexico, in several West African countries and also in the Netherlands, where its subsidiary owns 45% of a refinery in Zealand, operated jointly with the French TotalEnergies.

Last week, raw materials trading company Gunvor withdrew its proposal to purchase Lukoil’s international assets following a tweet from the Treasury Department.

“President Trump has been clear: the war must end immediately. As long as Putin continues with senseless killings, Gunvor, the Kremlin’s puppet, will never obtain a license to operate and profit”, wrote that American ministry.

President Trump has been clear that the war must end immediately. As long as Putin continues the senseless killings, the Kremlin’s puppet, Gunvor, will never get a license to operate and profit.

— Treasury Department (@USTreasury)

Gunvor, registered in Cyprus but with offices in Geneva, Switzerland, rejected the accusation.

“Gunvor has always been open and transparent about its ownership and business, and over a decade ago it actively distanced itself from Russia, stopped trading in compliance with sanctions, sold its Russian assets and publicly condemned the war in Ukraine,” the company wrote in X.

The Treasury Department statement about Gunvor is fundamentally misinformed and false. Gunvor is and has always been open and transparent about its ownership and business, and has for more than a decade actively distanced itself from Russia, stopped trading in line with…

— Gunvor Group (@Gunvor)