"Lukoil's big sale"? New problems await Russia and Europe from fresh sanctions

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to the Novye Izvestia Internet portal on the current situation around LUKOIL's foreign assets.

— As we understand it now, Lukoil was preparing for the possible imposition of sanctions by the United States and, in fact, prepared a deal with Gunvor in advance, which was rejected by the US Treasury. And it seems that Lukoil did not have a backup plan of action. The company is currently facing a serious problem. In fact, it is forced to sell off its foreign assets piecemeal in order to avoid the threat of their nationalization," Alexey Gromov believes.

— If these assets are sold, they will be sold at a significant discount. There will be significant economic losses for Lukoil. There remains a danger that some of these assets will not be sold, and then they will be transferred to the external management of the countries in which they are located. This possibility exists for European countries such as Bulgaria and Finland. Perhaps such a scheme will be proposed in Iraq, although questions remain here, since Lukoil is negotiating with the Iraqi regulator to resolve this issue, the expert lists the pain points.

— If we talk about the risks within the country, they are related to the possibility of Lukoil maintaining oil exports from production assets in Russia, taking into account possible scenarios. In the most negative case, absolute export volumes may decrease starting from December of this year. But we believe that Lukoil will try to use the same schemes that Gazpromneft and Surgutneftegaz used to reorganize exports from Russia, - Alexey Gromov says.

— If we assume that some of the exports will not be in demand due to sanctions restrictions, then it will be almost impossible to redirect some of the volumes to the domestic market, thereby trying to artificially increase the consumption of motor fuel inside Russia, — the analyst notes.