OFAC Sanctions Russia's Two Largest Oil Companies

Overview

On October 22, 2025, the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury sanctioned two of Russia's largest oil companies, Open Joint Stock Company Rosneft Oil Company ("Rosneft") and Lukoil OAO ("Lukoil"). In remarks on the action, Secretary Scott Bessent stated: "given President Putin's refusal to end this senseless war, Treasury is sanctioning Russia's two largest oil companies, which fund the Kremlin's war machine." Following the designations, public sources reported sharp rises in oil prices, with Brent crude reportedly rising 5.4% to $66 a barrel.¹

Key SDN Designations

In addition to designating Rosneft and Lukoil pursuant to E.O. 14024 for operating or having operated in the energy sector of the Russian Federation economy, OFAC targeted a number of Russia-based Rosneft and Lukoil subsidiaries. The subsidiaries were also designated pursuant to E.O. 14024, and for a full list of the entities targeted by this action please refer to Annex 1: Rosneft and Lukoil Subsidiaries. Entities owned 50 percent or more by one or more of these designated entities are also blocked under OFAC's 50% Rule.

As with prior OFAC designations, all property and interests in property of the designated individuals and entities that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC.

All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are also prohibited unless authorized by a general or specific license issued by OFAC or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.

General Licenses

OFAC also issued four Russia-related general licenses ("GLs"), (1) GL 124-A "Authorizing Petroleum Services and Other Transactions Related to the Caspian Pipeline Consortium and Tengizchevroil Projects"; (2) GL 126 "Authorizing the Wind Down of Transactions Involving Rosneft or Lukoil"; (3) GL 127 "Authorizing Certain Transactions Related to Debt or Equity of, or Derivative Contracts Involving, Rosneft or Lukoil"; and (4) GL 128 "Authorizing Certain Transactions Involving Lukoil Retail Service Stations Located Outside of Russia".

• GL 124-A supersedes and replaces GL 124, and authorizes all transactions prohibited pursuant to section 1(a)(ii) of E.O. 14071 ("Prohibition on Petroleum Services") that are related to the Caspian Pipeline Consortium or Tengizchevroil projects. GL 124-A also authorizes all transactions prohibited by E.O. 14024 ("Blocking Property with Respect to Specified Harmful Foreign Activities of the Government of the Russian Federation") involving Rosneft, Lukoil, or any entity in which Rosneft and/or Lukoil own, directly or indirectly, individually or in the aggregate, a 50 percent or greater interest ("Subsidiaries") that are related to Caspian Pipeline Consortium or Tengizchevroil projects. However, GL 124-A does not authorize any transactions otherwise prohibited by the Russian Harmful Foreign Activities Sanctions Regulations, 31 CFR part 587 ("RuHSR").
• GL 126 authorizes the wind down of transactions involving Rosneft, Lukoil, or Subsidiaries through November 21, 2025, provided that any payment to a blocked person is made into a blocked account in accordance with the RuHSR. However, GL 126 does not authorize any transactions prohibited by Directive 2 and Directive 4 under E.O. 14204, or any transactions otherwise prohibited by RuHSR.
• GL 127 authorizes: all transactions prohibited by E.O. 14024 (1) that are ordinarily incident and necessary to the divestment or transfer, or the facilitation of the divestment or transfer, of debt or equity issued or guaranteed by Rosneft, Lukoil, or Subsidiaries ("Covered Debt or Equity") to a non-U.S. person; (2) that are ordinarily incident and necessary to facilitating, clearing, and settling trades of Covered Debt or Equity that were placed prior to October 22, 2025; and (3) that are ordinarily incident and necessary to the wind down of derivative contracts entered into prior to October 22, 2025 that (i) include Rosneft, Lukoil, or Subsidiaries as a counterparty or (ii) are linked to Covered Debt or Equity, provided that any payment to a blocked person is made into a blocked account in accordance with the RuHSR, through November 21, 2025. However, GL 127 does not authorize U.S. persons (1) to sell, or to facilitate the sale of, Covered Debt or Equity to, directly or indirectly, any person whose property and interests in property are blocked; or (2) to purchase or invest in, or to facilitate the purchase of or investment in, directly or indirectly, Covered Debt or Equity. GL 127 does not authorize any transactions prohibited by Directive 2 and Directive 4 under E.O. 14204, or any transactions otherwise prohibited by RuHSR either.
• GL 128 authorizes the wind down of transactions involving Lukoil retail service stations, located outside of the Russian Federation through November 21, 2025. The Lukoil retail service stations are physical stations located outside the Russian Federation and in existence on or before October 22, 2025, in which (1) Lukoil has an interest, or (2) any entity in which Lukoil owns, directly or indirectly, a 50 percent or greater interest, has an interest. However, GL 128 does not authorize any transactions prohibited by Directive 2 and Directive 4 under E.O. 14204, or any transactions otherwise prohibited by RuHSR.

Practical Impact

Following OFAC's press release, this action is intended to increase pressure on Russia's energy sector, limiting its ability to generate revenue that could be used to support ongoing military activities related to the conflict in Ukraine and stabilize its economy. The immediate impact of this action remains uncertain, as its effectiveness will largely depend on the strength and consistency of forthcoming enforcement measures. Companies operating in finance, energy, and commodities trading should proactively evaluate their potential exposure to the designated entities and prepare for possible compliance implications.

Footnote

1 See Oil Price Jumps on Trump's Russia Sanctions - The New York Times.

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