Russian oil firm’s multibillion-dollar assets overseas at risk as US sanctions begin to bite

By Tim Lister, Mohammed Tawfeeq, CNN

(CNN) — The Iraqi government says it can no longer work with Russian oil company Lukoil – which has a huge stake in the country’s oil fields – because of recently imposed US sanctions against the company.

Lukoil has told Iraq’s state oil company SOMO that it is declaring force majeure – citing circumstances beyond its control for its inability to fulfill its contract – according to Oil Ministry spokesman Abdul Sahib Bazoun al-Hasnawi.

Lukoil has a 75% stake in the giant West Qurna-2 field in southern Iraq, which produces more than 400,000 barrels of crude oil a day. Overall, its overseas assets are valued at more than $20 billion.

Al-Hasnawi told CNN that Lukoil was unable to pay the salaries of hundreds of employees, most of them Iraqis, due to the sanctions announced by US President Donald Trump on October 22.

CNN has reached out to Lukoil for comment.

Lukoil failed in its bid to sell its overseas operations to an Austrian-based company last week after the US Treasury intervened to block the move and its global assets are now at risk, according to industry analysts.

Companies operating in Iraq “must be completely free from any operations, suspicions, or sanctions that may be issued … by the US Treasury or even the European Union,” according to Ali Nizar al-Shatari, director general of Iraq’s State Oil Marketing Organization known as SOMO.

“All payments for exported oil and petroleum products are processed through the SWIFT (international transactions) system, which prohibits participation by sanctioned or high-risk entities,” al-Shatari said in a video statement last week.

SOMO has suspended crude oil payments owed to Lukoil for the month of November – estimated at around four million barrels.

“Lukoil’s dues remain frozen until a compliant payment mechanism is established,” al-Shatari said.

Industry analysts say that several Lukoil shipments from Iraq were scheduled for this month.

Lukoil had tried to sell its overseas assets to Gunvor, a Swiss-based oil trader, but withdrew its bid after the US Treasury said it would “never” grant Gunvor a license to operate the assets.

Lukoil said on October 30 that it had accepted an offer from Gunvor to buy its subsidiary Lukoil International GmbH, which owns the international assets of Lukoil Group.

But last Thursday, the US Treasury said in a post on X that “as long as (Russian President Vladimir) Putin continues the senseless killings (in Russia’s war on Ukraine), the Kremlin’s puppet, Gunvor, will never get a license to operate and profit.”

Lukoil International has a 5% stake in the Chevron-operated Tengiz oil development in Kazakhstan, as well as refineries in Romania and Bulgaria and a global trading operation controlled by a Swiss-based subsidiary.

The Bulgarian authorities have tightened security around the Lukoil refinery in Burgas, according to state media, while the government drafts legislation that will allow it to take control of the refinery and sell it to a new owner to protect the plant from US sanctions.

Last week the Finnish service station chain Teboil, also owned by Lukoil, was running out of fuel as sanctions against the parent company prevented it from doing business.

Last month, Finnish energy firm Neste suspended fuel deliveries to Teboil following the US measures against Lukoil.

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