Lukoil’s oil trading business sheds staff in Singapore, Geneva and Dubai as sanctions near

[LONDON] The oil trading business of Russia’s Lukoil PJSC began shedding staff all over the world – with just days to go until sanctions on the Moscow-based energy giant are due to kick in.

In Geneva, Dubai and Singapore staff have received termination offers and are starting to sign agreements, according to people familiar with the matter who asked not to be identified discussing private information. Operations are starting to wind down in at least two locations, the people said.

The decision to shed staff is one of the most visible effects so far of US sanctions on Lukoil, which were announced last month with a brief window before they enter into force on Nov 21. The company’s international trading operation handled about 1.2 million barrels a day of crude last year – roughly the same as Turkey consumes.

The coming US sanctions will make it challenging for Lukoil’s trading arms to operate in markets that mostly require dollar transactions, letters of credit from banks and trust between counterparties. Sanctions had already prompted other commodity dealers and bankers to avoid transacting with Litasco.

Employees at Geneva-headquartered Litasco – which operates in multiple regions including Europe and the US – are starting to sign mutually agreed termination contracts, one person said. They didn’t say which roles were being terminated.  

Dubai-based Alghaf Marine DMCC – a successor company to Litasco’s Middle East operation there – is also terminating roles. Likewise, staff at LMT Energy Asia Pacific, the Asian unit of Litasco, were offered buyouts on Thursday.

Litasco and Lukoil didn’t respond to requests for comment.

The US sanctions are stressing Lukoil, Russia’s No 2 producer, globally. The company recently declared force majeure on oil shipments from its giant West Qurna 2 field in Iraq, while in Romania, the country’s president said his country may temporarily take control of the firm’s local assets. 

A deal to buy Lukoil’s international assets was scuppered last week when the US Treasury described would-be buyer Gunvor Group as the Kremlin’s “puppet,” prompting it to withdraw its offer.

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Founded in 2000, Litasco was set up as a trading arm of Lukoil Group. It subsequently established itself in the crude oil, petroleum product, gas and biofuel markets, according to its 2023 sustainability report. 

The Litasco Group – consisting of Litasco and various national retail and refining entities, consolidated underneath it – carries out trading activities worldwide, according to the report. In 2023, Litasco’s assets were located in 14 countries. BLOOMBERG