The Iraqi government has announced that it can no longer work with Russian oil giant Lukoil, which holds a significant stake in the country’s oil fields, due to recently imposed United States sanctions against the company.
According to Oil Ministry spokesman Abdul Sahib Bazoun al-Hasnawi, Lukoil has informed Iraq’s state oil company, SOMO, that it is declaring force majeure, citing circumstances beyond its control for its inability to meet contractual obligations.
Lukoil controls a 75% share of the West Qurna-2 field in southern Iraq, which produces over 400,000 barrels of crude oil per day. Its international 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 whom are Iraqi, because of the sanctions announced by U.S. President Donald Trump on October 22.
The company’s recent attempt to sell its overseas operations to an Austrian-based firm failed after the U.S. Treasury blocked the deal, putting Lukoil’s global assets at risk, analysts say.
“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,” explained Ali Nizar al-Shatari, director general of Iraq’s State Oil Marketing Organization (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,” he added in a video statement last week.
In response, SOMO has suspended crude oil payments owed to Lukoil for November, which amount to roughly four million barrels.
“Lukoil’s dues remain frozen until a compliant payment mechanism is established,” al-Shatari said.
Industry observers note that several Lukoil shipments from Iraq had been planned for this month.
Lukoil initially attempted to sell its overseas assets to Swiss-based oil trader Gunvor, but withdrew after the U.S. Treasury stated it would “never” grant Gunvor a license to operate the assets.
On October 30, Lukoil had announced that it accepted Gunvor’s offer to purchase its subsidiary, Lukoil International GmbH, which manages Lukoil Group’s international operations.
However, the U.S. Treasury later stated on X, “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 also holds a 5% stake in Chevron-operated Tengiz oil development in Kazakhstan, as well as refineries in Romania and Bulgaria, and a global trading network run through a Swiss-based subsidiary.
Bulgarian authorities have heightened security at the Lukoil refinery in Burgas, while drafting legislation that would allow the government to take control of the plant and sell it to a new owner to shield it from U.S. sanctions.
Meanwhile, Finnish service station chain Teboil, owned by Lukoil, faced fuel shortages last week due to the sanctions, after Finnish energy company Neste suspended fuel deliveries to the chain.
