U.S. Treasury Blocks Bid for Lukoil’s Foreign Assets

The U.S. Treasury Department has rejected a bid by a group of companies led by investment bank Xtellus Partners to buy the foreign assets of Russia’s Lukoil, Reuters has reported, citing several unnamed sources.

The assets, valued at some $22 billion, were put on the market after the United States imposed sanctions on Lukoil and Rosneft. The first bidder was Swiss commodity major Gunvor, which President Trump called a Russian “puppet”.

Since then, Chevron, Exxon, Hungarian MOL, Emirati International Holding Company, and private equity major Carlyle have come forward as potential suitors for Lukoil’s foreign business, among others.

According to the Reuters sources, the Russian energy major had liked the Xtellus bid, which involved a stipulation that the proceeds from the sale would be used to compensate U.S. investors in the Russian company that lost their money after the stock freeze following the Ukraine war. Essentially, the deal was going to be a cashless sale back to Lukoil securities held by U.S. investors in exchange for the company’s global assets. The deal, as proposed, however, had been seen as too difficult to execute, Reuters said, citing its sources.

The Treasury Department had reportedly rejected the deal because the buyers’ group had no permission to use sanctioned securities in a transaction. The group is not giving up, however, planning to go higher in the Treasury Department and get the initial decision reversed.

Lukoil has faced escalating restrictions on its global operations since the onset of Western sanctions following Russia’s invasion of Ukraine. The company holds a range of international upstream and downstream assets across Europe, the Middle East, and Africa, including refineries in Italy and the Netherlands, and upstream stakes in Iraq, Uzbekistan, and West Africa. The company operates a network of more than 2,000 fuel stations across the world.

By Irina Slav for Oilprice.com

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