Romania Seizes ‘‘‘2 Billion of Russia’s Lukoil Assets; Lukoil Controls Over 20% of Romania’s Market for Petroleum Products
Romania and Lukoil, a Russian oil major with a significant overseas presence, are engaged in a standoff over accusations levied by Bucharest of money laundering and tax evasion related to the operations of Petrotel-Lukoil SA, the company’s refinery business in Romania. In their most aggressive action to date related to these accusations, on July 9, Romanian authorities seized some ‘‘‘2 billion in Lukoil assets in the country. Lukoil President Vagit Alekperov recently asked Romanian President Klaus Iohannis and the Chairman of the European Commission to conduct an investigation into the charges, which Lukoil alleges are without merit. The investigation now reportedly includes the local head of Petrotel Lukoil and five employees, including two Russian citizens, The assets seized thus far include accounts held with Dutch and British banks.
In response to the charges, Lukoil Vice President Thomas Mueller said, “We don’t plan to leave Romania. We are going to continue to work here.” In response to reports that a private Romanian company had offered to purchase the company’s assets in the country, Mr. Mueller went on to say, “We are not putting the plant on sale. It’s strange to receive an offer to sell, if we are not going to sell it.” At present, it would appear that Romania is seeking to push the company out of the country, taking the risk of the related market disruptions, whereas Lukoil is strongly resisting this outcome.
As mentioned, Lukoil has a significant footprint in the country’s energy sector, with the Petrotel Ploiesti refinery one of the largest and most technologically advanced.. It provides fuel for about 300 filling stations and controls some 20% of Romania‘s market for petroleum products. In the course of this standoff, the refinery has already experienced some minor shut-downs, although the company is unlikely to leave the country quietly, as demonstrated by the comments made by its officials, due to the strategic positioning it represents for Moscow. Moreover, the company also controls two of Romania’s offshore concessions, where there is significant enthusiasm over oil and gas discoveries that carry the potential to end Romania‘s dependency on Russian gas imports and possibly even make the country an exporter to the region.
Should Lukoil become a contentious entity in efforts by Romania and other countries in the region to break free of inordinate Russian influence over their energy sectors, it would likely implicate Bulgaria, where Lukoil owns and operates the Neftochim-Burgas oil refinery, which produces a troubling 25% of that country’s annual tax receipts.