US Lukoil Gas Station Owners Left in Limbo Over Russia Sanctions

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The Lukoil name became a liability after Russia’s invasion of Ukraine in 2022. In the immediate aftermath, Lukoil stations in New Jersey faced state-endorsed boycotts. Some credit cards used by fleet customers stopped working at the stations.

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Sales have fluctuated ever since, amid falling public sentiment toward the Kremlin, said Gagan Kehal. The 33-year-old New Jersey native manages a Morris County gas station his father purchased as a Mobil franchise the year Kehal was born. He said his employees are frequently questioned by customers about the business’s ties to Russia. 

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More recently, a few long-time patrons have stopped coming to the station.

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The loss of customers comes just as conditions should be more favorable for retailers, with gas prices at multi-year lows. That typically spurs more driving, and more convenience-store spending, which carries higher profit margins than the fuel itself, according to Blomgren at the New Jersey trade group.

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Things got worse for the franchisees with the latest round of sanctions. BCB Bancorp Inc. cut links with Lukoil, freezing owners out of revenue from payments made via credit, debit and prepaid cards. Amex cards briefly stopped operating at the pump for an unclear and unrelated reason. Lukoil is now working with two small regional banks, OceanFirst Bank NA and Parke Bancorp, to handle transactions.

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Lukoil’s ties with refining giant Phillips 66 also ended and it turned to New-Jersey based distributor Gill Energy for its fuel supplies. Phillips 66 declined to comment.

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In recent weeks, Lukoil North America representatives have visited stations to request payments on the outstanding balance on fuel loans, according to several gas-station employees.

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The workers also report an interruption to electronic money transfers from Lukoil, which handles revenue and subtracts expenses before paying the franchisees. Instead, the company is making payments via check, according to the employees, who asked not to be identified discussing private financial details. 

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“We still have to pay our employees and continue operating the stations,” Kehal said. “That’s definitely hurting.”

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Lukoil’s situation bears some similarities with that of Petróleos de Venezuela SA, the Venezuelan state-owned oil company whose Citgo Petroleum Corp. unit supplied several thousand branded gas stations across the US. Following US sanctions in 2019, regulators allowed Citgo to keep operating under a US-appointed board. The Citgo flag still flies over stations nationwide.

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Whether the Lukoil brand ultimately lives on in the US remains unclear. The Russian company is also trying to divest major foreign assets. The size and political gravity of any transaction means it could take several months if not longer to be completed, according to Doug Jacobson, a sanctions lawyer at Jacobson Burton Kelley PLLC. 

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In the meantime, Kehal keeps in touch with fellow franchisees via a Whatsapp group. Many have little choice but to wait for a buyer for the chain, hoping it will allow them to rebrand and move on. For some, there’s the desire to buy their stations from the Russian-owned company, a possibility only if a third-party buyer emerges and triggers their right of first refusal — an attractive but expensive prospect.

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New ownership would be a chance to be “in control of my own destiny,” said Roger Verma, who owns five Lukoil stations. “We’ve invested a lifetime of savings into these businesses.”

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—With assistance from Sophie Butcher.

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