Russia's multi-billion dollar oil assets are 'stuck'
Russia's multi-billion dollar oil assets are "stuck" in many countries after the US imposed new sanctions.
Lukoil - one of Russia's largest oil and gas companies - is currently unable to fulfill contracts, receive payments, pay employees or transfer assets abroad.
Iraq suspends cooperation, millions of barrels of oil held back
The Iraqi government has confirmed that it cannot continue working with Lukoil because the Russian group is under US sanctions. Lukoil holds a 75% stake in the West Qurna-2 field, one of Iraq's largest with an output of more than 400,000 barrels per day.
Lukoil declared “force majeure” because it could not meet its contractual obligations, said Iraqi Oil Ministry spokesman Abdul Sahib Bazoun al-Hasnawi. All payments for crude and products from the field must go through the SWIFT system, which prohibits sanctioned companies from participating.
As a result, Iraq has suspended payments for about 4 million barrels of oil to Lukoil in November, pending the establishment of a new payment mechanism that complies with international law.
Lukoil tries to respond but meets an impasse
Lukoil had previously tried to sell some of its foreign assets to Swiss oil trading company Gunvor, but had to halt the plan after the US Treasury Department refused to grant permission. The company has also had great difficulty paying the salaries of hundreds of workers in Iraq due to a lack of legal financial channels.
In addition to Iraq, Lukoil’s other international assets are at risk of being frozen. In Kazakhstan, its stake in the Chevron-operated Tengiz project could be affected. Meanwhile, Romania and Bulgaria, where Lukoil operates refineries, are considering legal options to avoid sanctions.
Bulgaria has stepped up security around the Burgas oil refinery and is preparing legislation that would allow the state to take over or sell the facility if necessary.
European energy supply chain impacted
US sanctions have also disrupted Lukoil's European subsidiaries. In Finland, the Teboil gas station chain is running out of fuel after suppliers including Neste halted deliveries due to sanctions compliance risks.
Experts warn that asset freezes and transaction restrictions could have far-reaching effects on the global oil supply chain. If the situation persists, European and Middle Eastern energy markets could experience significant volatility in the coming period.
