Lukoil sale held hostage by Ukraine negotiations

The United States has slowed the sale of international assets of Russian oil giant Lukoil to put pressure on Russia in peace talks over Ukraine.

This was reported by Reuters, citing four sources familiar with the talks.

The US Office of Foreign Assets Control (OFAC) yesterday extended the deadline for closing the deals from February 28 to April 1, according to an OFAC document seen by Reuters.

U.S., Russian and Ukrainian officials have made no progress in recent weeks in talks in Geneva, Abu Dhabi and Miami on a peace deal for Ukraine. The talks have also included U.S. sanctions on Russia's largest oil producer, state-owned Rosneft, as well as its second-largest producer, Lukoil, according to three sources familiar with the discussions. The next round of talks between the U.S., Russia and Ukraine is scheduled for March.

OFAC has already extended the deadline for potential buyers to negotiate with Lukoil for assets worth $22 billion three times since Washington imposed sanctions on the two Russian oil companies in October.

A US official said the Treasury Department extended the deadline to “facilitate ongoing negotiations with Lukoil and reach an agreement that supports President (Donald) Trump’s efforts to deny Russia the revenues it needs to maintain its war machine and achieve peace.”

Any deal would require Lukoil to receive no upfront value and all proceeds from the sale would be deposited into an account with frozen assets subject to U.S. jurisdiction, the official said. The sale could still be completed independently of a peace deal, according to another source familiar with the matter.

The sanctions have forced the sale of Lukoil's international portfolio, which includes oil fields, refineries and gas stations from Iraq to Finland. The sale has attracted interest from more than a dozen bidders, from US oil giant ExxonMobil to the former owner of Pornhub, Reuters reported.

OFAC has been leading the process of selling Lukoil's assets, but the process has recently been elevated to a higher level and now involves senior officials from the White House, Treasury Department and State Department, with Treasury Secretary Scott Besant more directly involved, according to three sources.

Earlier this month, Ukrainian President Volodymyr Zelensky said intelligence services had told him that Russian envoy Kirill Dmitriev had proposed a $12 trillion economic deal to the Trump administration. The deal includes Lukoil assets, which could further complicate the sale.

Reuters writes that several companies have signed agreements with Lukoil, including the American private equity firm Carlyle Group, Saudi Midad Energy, as well as American billionaire Todd Boely, who is working with investment bank Extelus Partners and the United Arab Emirates fund Alliance Investment Partners.

A partnership between Chevron and Texas-based Quantum Capital Group is also in active talks about the portfolio, but has not yet reached an agreement on terms with Lukoil.