- within Finance and Banking topic(s)
The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has issued updated general licenses—General License (“GL”) 131E and GL 128C—that provide limited, but significant authorizations related to Public Joint Stock Company (“PJSC”) Oil Company Lukoil’s (“Lukoil”) efforts to divest Lukoil International GmbH (“LIG”), as well as LIG’s majority-owned subsidiaries, e.g., entities in which LIG owns a 50 percent or greater interest (collectively, “LIG Entities”). LIG is a wholly owned subsidiary of Lukoil and holds the company’s international assets. The assets include oil fields, refineries, and gas stations in numerous countries. See prior Lewis Brisbois alerts here and here that discussed the October 2025 blocking sanctions on Lukoil that have necessitated the divestment.
OFAC has since extended the deadline for divestment of Lukoil’s assets outside Russia several times, granting licenses that allow for continued negotiations as well as ongoing maintenance, operation, and wind down activities. The licenses are subject to strict conditions and expiration dates, including provisions that bar any windfall to Lukoil, with all payments required to be paid into an account frozen until such time as sanctions are lifted. The latest extension runs through May 30, 2026.
Contingent Sale Negotiations and Agreements (GL 131E)
To facilitate divestment, GL 131E authorizes negotiation of and entry into contingent contracts through 12:01 a.m. EDT on May 30, 2026, with Lukoil for the sale, disposition, or transfer of LIG Entities. GL 131E requires such contracts to contain an express term that the transaction is contingent on obtaining separate OFAC authorization (i.e., specific license).
For purposes of GL 131E, the term “contingent contracts” is defined broadly to include executory contracts and pro forma invoices, agreements in principle, offers capable of acceptance—such as public tender bids—and binding memoranda of understanding, as well as any similar agreements. Related FAQ 1224 elaborates that GL 131E also authorizes negotiations on definitive agreement terms, as well as related financial, legal, and operational due diligence, including the engagement of outside counsel, financial advisors, and other professionals.
Importantly, OFAC has outlined clear expectations it will apply when reviewing any application for a specific license to consummate a sale of LIG. At minimum, OFAC expects:
- Complete severance of LIG’s ties with Lukoil post-transaction
- Blocking of any funds owed to Lukoil in an account subject to U.S. jurisdiction until U.S. sanctions are lifted
- No windfall or upfront benefit to Lukoil, including asset swaps (exchange of assets), share swaps (exchange of equity interests), or similar value transfer mechanisms
- Moreover, OFAC expects that any purchaser of LIG assets will seek OFAC review before any subsequent divestment of material LIG assets. In other words, though not required under GL 131E per se, OFAC is signaling that if it approves a sale of LIG, it expects the buyers who acquire LIG assets to seek OFAC review before any further divestment of material LIG assets.
Maintenance, Operation, and Wind Down of LIG Operations (GL 131E and GL 128C)
Following that same timeline, through 12:01 a.m. EDT on May 30, 2026, GL 131E authorizes transactions ordinarily incident and necessary to the maintenance or wind down of operations, contracts, and other agreements of LIG entities.
Separately, GL 128C authorizes transactions through 12:01 a.m. EDT on October 29, 2026 that are ordinarily incident and necessary to the purchase of goods and services from, or the maintenance, operation, or wind down of physical retail service stations (e.g., gas stations) located outside of Russia—GL 128C does NOT apply to retail service stations physically located within Russia.
Related FAQ 1225 states that both GLs 131E and 128C authorize “transactions undertaken in the ordinary course of business,” which may involve, among others:
- Supply of motor fuel and lubricants
- Payments to government authorities
- Legal services and participation in legal proceedings
- Payments to suppliers, landlords, lenders, and joint venture or contractual partners
- Maintenance of pre-existing capital investments
- Performing pre-existing agreements and intracompany transfers
- Notably, pursuant to both GLs 131E and 128C, blocked accounts of LIG Entities may be used, debited or credited, by financial institutions, payment processors, and other intermediaries, to effectuate these authorized activities. No general unblocking of property is permitted under either license, and transfers of funds to any person or account located in the Russian Federation are categorically prohibited.
Key Takeaways
GLs 131E and 128C provide potential relief for orderly divestment of Lukoil’s foreign assets and off ramps for Lukoil retail service station operations outside of Russia. That relief could be reversed, however, should Lukoil fail to demonstrate it is engaging in good faith negotiations regarding the divestment of LIG or its assets, as OFAC maintains authority to revoke GL 131E. The two GLs, while similar, differ in scope and expiration dates. Such distinctions are critical for non blocked parties considering transactions involving LIG entities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
