OFAC Designates Rosneft and Lukoil: Expanding Sanctions on Russia’s Energy Sector
On 22 October 2025, Office of Foreign Asset Control (OFAC) announced that it has designated Open Joint Stock Company Rosneft Oil Company (Rosneft) and Lukoil OAO (Lukoil) under Executive Order 14024 for operating in the energy sector of the Russian Federation economy.
Key Takeaways
The designation of Rosneft and Lukoil is significant: these are two of Russia’s largest oil companies, and their inclusion signals a broadening of sanctions targeting the Russian energy sector.
The coverage is not just the named companies — it extends to any entity 50% or more owned by them, captured by the ownership-rule.
Wind-down licences provide some transitional relief, but only until specific dates (e.g., 21 Nov 2025 for GL 126) and subject to conditions.
Both U.S. persons and non-U.S. persons must take the compliance implications seriously—especially due to the risk of secondary sanctions, and because many contracts and supply-chains may be impacted.
Organisations should act promptly to screen counterparties, contracts, ownership structures, payment flows and exposure to the Russian energy sector.
2. Legal & Compliance Implications
2.1 Prohibitions
From the moment of designation, the property and interests in property of Rosneft, Lukoil and the designated subsidiaries that are in the U.S. or in the possession or control of U.S. persons must be blocked.
U.S. persons are generally prohibited from engaging in transactions with the designated parties unless authorized by a license from OFAC.
The “50 percent rule”: any entity that is 50 % or more owned (directly or indirectly) by one or more blocked persons is also treated as blocked.
Secondary sanctions risk: Certain foreign financial institutions may face sanctions for “significant transactions” involving the blocked parties or support of Russia’s military–industrial base.
2.2 Wind-Down & Transitional Relief
General License 126 allows U.S. persons to engage in transactions ordinarily incident and necessary to wind down transactions involving Rosneft or Lukoil until 12:01 a.m. EST on 21 November 2025, subject to conditions.
The wind-down licence excludes transactions prohibited by certain Directives under E.O. 14024 (e.g., Directive 2 or 4).
2.3 Additional Considerations
The guidance under the RuHSR emphasises that non-U.S. persons can also face risk if they facilitate significant transactions for or on behalf of the designated parties.
Entities or individuals must assess exposure not just through direct dealings with Rosneft/Lukoil, but also via subsidiaries, joint ventures, supply chains, financing, services (including maritime, logistics, insurance) and upstream/downstream transactions.
Entities should review whether any of their counterparties are owned 50% or more by the designated parties, and therefore blocked under the 50%-rule.
Because the sanctioning authority is E.O. 14024 (and incorporated into RuHSR), authorities may impose civil or criminal penalties for non-compliance.
3. Practical Impact & Risk Scenarios
3.1 For U.S. Persons (or Entities subject to U.S. jurisdiction)
All transactions (imports, exports, services, financing, insurance) with Rosneft, Lukoil or their blocked subsidiaries are prohibited unless a license applies.
Legacy contracts will need to be reviewed; if involving the designated parties or 50%-owned entities, options are either termination or wind-down (if covered by GL 126) by 21 Nov 2025.
Insurance and logistics providers must check whether they are inadvertently facilitating services to or for the designated companies.
3.2 For Non-U.S. Persons
While not per se prohibited under U.S. law, there is a risk of “re-export” or U.S. nexus triggering U.S. jurisdiction, or secondary sanctions risk if the institution knowingly facilitates significant transactions.
Non-U.S. banks, insurers, shipping/transport companies should conduct due diligence on whether their counter-parties or upstream/downstream clients are linked to Rosneft/Lukoil or 50%-owned entities.
Third-country companies with operations in U.S. jurisdiction (e.g., U.S. persons, U.S. dollar-clearing) will have heightened exposure.
3.3 Supply Chain & Financing
Suppliers of equipment, technology, services to Rosneft/Lukoil may now face blocked status – any payments must be made into blocked accounts and compliant with the wind-down licence (if relevant).
Borrowing or equity arrangements: GL 127 authorises certain transactions related to debt/equity/derivatives of Rosneft/Lukoil but only under specific conditions. Entities must carefully check the licence text.
Any joint ventures, distributions, dividends, payments to or from Rosneft/Lukoil need to be screened for their status post-designation.
3.4 Contractual & Operational Considerations
Contract review: Identify any contract with the designated parties or their ownership chain. Determine whether the contract needs termination or winddown.
Payment/settlement systems: Checks required to ensure no transactions are routed via U.S. correspondent banks that might process blocked funds; the licence exceptions are narrow.
Insurance or maritime services: The advisory context emphasises risk in sectors providing services to Russian oil/export operations. See OFAC’s advisory: “Advisory for the Maritime Oil Industry and Related Sectors”.
4. Action Plan Recommendations
4.1 Immediate Steps
Sanctions screening: Update internal sanctions lists immediately to include Rosneft, Lukoil and the subsidiaries listed by OFAC. Ensure the 50%-rule is applied.
Due diligence: Perform enhanced due diligence on all counterparties, suppliers and clients that may have exposure to the Russian energy sector.
Contract audit: Review existing contracts and identify any involving the designated entities or their ownership network. Determine whether wind-down or termination is required.
Payment channels: Review banking/payment channels to ensure no blocked party is transacting via your systems, including indirect exposure via 50% owned entities.
Training & awareness: Update legal/compliance teams and relevant business units about the new sanction risks; emphasise that the designation is broad and covers 50%-owned entities even if not explicitly named.
4.2 Medium-Term Measures
Risk mapping: Map your organisation’s exposure in supply chain, financing, insurance, maritime, logistics, energy sectors—particularly visibility into exposures to the Russian Federation’s energy sector.
Policies & controls: Ensure your sanctions compliance policy is updated for the RuHSR programme and addresses wind-down licences, general licence allowances, and secondary risk for non-U.S. persons.
Contractual clauses: Incorporate or review sanctions-related termination/exit clauses for counterparties that may become designated or expose the organisation to secondary risk.
Monitoring & audits: Implement ongoing monitoring for changes in designations, licence updates, enforcement actions and ensure internal audit covers sanctions compliance.
4.3 Scenario Planning
Regulatory developments: Track related sanctions developments: broader sectoral sanctions, price-cap updates, EU or UK actions, which may affect global operations.
Secondary sanctions risk: For non-U.S. operations, assess whether engaging with entities linked to Rosneft/Lukoil could expose you to U.S. or partner-jurisdiction enforcement.
Summary key note:
Both companies are now subject to the “Russia-Harmful Foreign Activities Sanctions” (RuHSR) under 31 CFR Part 587.
In addition to the primary companies, a number of Russia-based subsidiaries of Rosneft and Lukoil are also designated. OFAC states that all entities 50% or more owned, directly or indirectly, by Rosneft or Lukoil are blocked, even if not explicitly designated.
OFAC issued related General Licenses:
General License 126: wind-down transactions involving Rosneft or Lukoil.
General License 127: certain transactions related to debt/equity/derivatives of Rosneft or Lukoil.
General License 128: certain transactions involving Lukoil retail service stations located outside Russia.
Author: Manmeet Lotay, Global Sanctions Advisor, Ferrier Consultancy Services