Russian energy giant Lukoil has formally requested an extension to the U.S. Treasury Department’s deadline, which currently prohibits all transactions with the company after November 21, 2023. The request, according to sources familiar with the matter, stems from the need for additional time to finalize the sale of its international assets and fulfill ongoing business commitments. This move follows a series of sanctions imposed by the U.S. Treasury’s Office of Foreign Assets Control (OFAC), aimed at intensifying pressure on the Russian government and Russian President Vladimir Putin to end the ongoing war in Ukraine.

In October, OFAC expanded its sanctions against Lukoil and fellow Russian energy giant Rosneft, placing these companies under significant economic strain. As part of these measures, a general license was issued by the U.S. Treasury allowing companies to continue existing business relationships with Lukoil until November 21. This temporary license, which covers various transactions, including the potential sale of the company’s vast portfolio of international oil and gas assets, was meant to give businesses time to wind down their dealings with Lukoil in accordance with U.S. regulations.

However, Lukoil is now seeking additional time to complete pending sales and to evaluate ongoing offers for its international operations, which span a wide range of oil and gas production, refining, and trading activities around the world. The company’s ability to navigate this challenging situation is further complicated by the disruption of its international operations, particularly in Iraq.

Lukoil's struggle to divest its global assets has already faced significant setbacks. Earlier this year, the company reached an agreement to sell its international assets to Swiss commodities trader Gunvor, a deal that was ultimately derailed by U.S. opposition. The U.S. Treasury Department signaled its objections to the sale, citing concerns over potential risks to sanctions enforcement, leading to the collapse of the transaction. Since then, Lukoil has faced mounting challenges in offloading its assets, with many of its global operations experiencing operational disruptions.

One of the most significant casualties of this turmoil is the company’s stake in Iraq’s West Qurna 2 oilfield, its largest international asset. The disruptions at this oilfield have led to Lukoil declaring force majeure, a legal declaration that relieves the company of its contractual obligations due to unforeseen circumstances, such as sanctions and operational shutdowns. This is a notable development given that the West Qurna 2 field has been a key revenue generator for the company.

Lukoil, which is responsible for roughly 2% of global oil production, has acknowledged the mounting difficulties it faces in light of international sanctions and the shifting geopolitical landscape. The company confirmed on October 27 that it was actively seeking buyers for its international operations and may request an extension from OFAC if necessary. While the company has not publicly commented on its specific plans, the request for an extension underscores the complexities involved in unwinding decades of business across a broad international network.

As the November 21 deadline approaches, Lukoil’s ability to sell its assets and maintain operations under the new sanctions regime remains uncertain. The company is under increasing pressure not only from the U.S. government but also from the broader global market, which is closely watching the developments in Russian energy exports.

While it remains to be seen whether the U.S. Treasury will grant Lukoil's request for an extension, the outcome could have significant implications not only for the company but for global oil markets. In the midst of this uncertainty, Lukoil and other Russian energy firms are facing unprecedented challenges in navigating an increasingly hostile business environment.