Gunvor Scraps Lukoil Deal After US Calls It Kremlin ‘Puppet’

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(Bloomberg) — Commodity trader Gunvor Group has withdrawn its offer for the international assets of sanctioned Russian oil producer Lukoil PJSC after the US Treasury Department called it “the Kremlin’s puppet” and said the oil and gas trader would never get a license.

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Gunvor pushed back on the Treasury comment on social media, calling it “fundamentally misinformed and false.” The company said it would seek to correct a “clear misunderstanding” but that it would withdraw its bid for now.

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The comment is a remarkable volte-face after a week in which Gunvor has been in talks with the US Office of Foreign Assets Control, part of the Treasury Department, and other bodies in charge of sanctions to help press its case for a deal that would have transformed it into an integrated oil producing and processing colossus. Gunvor swooped on the assets at the end of last month following the US blacklisting of Lukoil and fellow Russian oil giant Rosneft PJSC, and its exit may leave the door open to other suitors.

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Gunvor on Thursday also announced it had raised $2.81 billion in a credit facility financed by US arms of global banks. Like other major commodity traders, the firm funds the bulk of its trades of oil, gas and metals around the world with bank financing.

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For the trader, the comments are likely to revive questions about its connections in Moscow at a time when many oil industry participants are wary of any links to Russia. 

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The trader’s co-founder, Gennady Timchenko, is a friend of Russian President Vladimir Putin, and when the US imposed sanctions on him in 2014, it claimed that Putin had investments in Gunvor. The company denied the claim, which was presented without evidence, and Chief Executive Officer Torbjörn Törnqvist bought out his Russian partner’s stake in the company.

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For Lukoil’s portfolio, the deal would represent a “clean break” away from Russian influence or control, Törnqvist told Bloomberg in an interview. He also ruled out selling any of the assets back to Russia’s second biggest oil producer if sanctions were to be removed.

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“Gunvor is and has always been open and transparent about its ownership and business, and has for more than a decade actively distanced itself from Russia, stopped trading in line with sanctions, sold off Russian assets, and publicly condemned the war in Ukraine,” Gunvor said in a statement Thursday. “We welcome the opportunity to ensure this clear misunderstanding is corrected.”

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The Treasury statement on the X social media platform came with no further explanation. The US Treasury did not respond to a request for comment about the social media post.

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Big deal

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Lukoil had shocked the market when announcing the deal last Thursday. Lukoil International reported an equity value of $21 billion in 2023 — more than three times Gunvor’s own equity value. 

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The assets for sale consisted of global upstream production equivalent to the number of daily barrels pumped by the nation of Ecuador, key coastal refineries in Europe and a petrol station network that stretches from New York to Istanbul.