Buyers of Lukoil's International Business Can't Rely on OFAC General License Alone, Agency Says
A potential buyer of Russian energy firm Lukoil's international business will need to obtain a separate authorization from the Office of Foreign Assets Control -- aside from the agency's existing general license for the firm -- to complete the sale, OFAC said in a new FAQ this week.
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The FAQ clarifies the scope of activities covered by a general license that OFAC published last week to allow certain transactions related to the sale of Lukoil's international business, Lukoil International GmbH (LIG) (see 2511140039). General License 131 authorizes "negotiations on terms for definitive agreements and financial, legal, or operational due diligence, including engagement of outside counsel or advisors," OFAC said. But it doesn't "authorize transactions to effectuate the actual sale, disposition, or transfer of any" entity or asset of Lukoil International.
"Any contract entered into pursuant to GL 131 must expressly be made contingent upon the receipt of a separate authorization from OFAC," the agency said. The Treasury Department "would evaluate any proposed sale of LIG based on factors that support U.S. national security and foreign policy objectives, such as whether the transaction: completely severs ties with Lukoil; blocks funds owed to Lukoil until sanctions are lifted; and does not provide a windfall to Lukoil."
The FAQ was published more than a week after Treasury posted on social media that it wouldn't be issuing a license for Gunvor Group, a multinational energy commodities trading company, to purchase Lukoil's international business. Lukoil said in October that it had accepted an offer for Gunvor to buy that business, and the two were awaiting clearance from OFAC (see 2510300020).
In its FAQ, OFAC added that General License 131 also authorizes transactions related to the maintenance or wind-down of operations, contracts or other agreements of LIG entities, as long as those transactions are "consistent with previously established practices and support pre-existing projects or operations." Other authorized activities include payments to employees, suppliers, landlords, lenders and partners; the preservation and upkeep of "pre-existing tangible property"; and "activities associated with maintaining pre-existing capital investments."
OFAC said it may revoke the general license at any time, including if Lukoil and LIG "do not appear to be engaging in good faith negotiations regarding the divestment of LIG or its assets." The license is scheduled to expire Dec. 31.