U.S. Sanctions Hit Lukoil: What Will Happen to Its Assets in Kazakhstan?

In late October, the United States imposed sanctions on Russia’s Lukoil, one of the world’s largest oil and gas corporations. What will happen now to Lukoil’s assets in Kazakhstan? 

Orda.kz explains.

Big Sell-Off

After Donald Trump announced sanctions against Lukoil, the Russian company quickly declared that it would part with its foreign assets. This will be a massive sell-off — even though the central part of the corporation’s business remains in Russia.

A buyer for most of Lukoil’s foreign assets has already been found: Gunvor Group Ltd, an international energy trading company once founded by Russian oligarch Gennady Timchenko (who left the founders’ list in 2014 for the same reason — international sanctions).

Gunvor is one of the world’s largest traders of oil and energy products and has a representative office in Almaty.

On October 30, Lukoil announced a deal with Gunvor for the sale of LUKOIL International GmbH, its wholly owned subsidiary that controls the company’s assets outside the Russian Federation. Preliminary agreements have already been reached: other potential buyers will not be considered.

Nuances still remain: not all of Lukoil’s assets in Kazakhstan are controlled through LUKOIL International GmbH, and not all of them will fully transfer to Gunvor.

What’s at Stake?

Oil and gas industry analyst Oleg Chervinsky notes that under the deal with Gunvor, Lukoil may transfer part—but not all—of its assets in Kazakhstan to the oil trader. This concerns the enterprises and ownership stakes that the Russian company controls through LUKOIL International GmbH, namely:

• Lukoil Lubricants Central Asia LLP
• Tengizchevroil LLP (5%)
• CPC-K JSC (12.5%)

The agreement with Gunvor does not cover Lukoil’s share in the consortium developing the Karachaganak field. In this case — as with Tengizchevroil — the transfer of assets, if planned, could proceed differently.

Lukoil’s share in the Karachaganak consortium is owned by another legal entity — Lukoil Overseas Karachaganak, and therefore it does not fall within the scope of the deal. The same goes for three LLPs created to operate in the Kazakh sector of the Caspian shelf: in Kalamkas-Khazar Operating and Al-Farabi Operating, the partner of KazMunayGas is directly Lukoil Oil Company PJSC, while in Zhenis Operating it is the subsidiary Lukoil Kazakhstan Upstream, writes Oleg Chervinsky.

Among Lukoil’s Kazakh assets that Gunvor is most likely to acquire, Lukoil Lubricants Central Asia LLP — a lubricant production plant in the Almaty region — stands out. 

According to oil and gas expert Nurlan Zhumagulov, it is a rather attractive purchase.

In recent years, Lukoil’s plant has been on the rise amid the weakening position of the Hill Corporation motor oil plant owned by the Kozhamzharov family (the Anti-Monopoly Agency identified an anti-competitive agreement worth over 12 billion tenge). It’s a good asset to buy, said Nurlan Zhumagulov.

The situation with other assets is less clear. In particular, for the promising Kalamkas-Sea and Khazar projects, the Russian company may simply reduce its ownership share by one percent (following the example of other joint ventures with KazMunayGas) to remove them from the scope of sanctions.

Subsoil Resources — Kazakhstan?

Oil and gas industry analyst Abzal Narymbetov told Orda.kz that as of early 2025, Lukoil ranked tenth in the world in oil production, ahead of Chevron and Shell.

Altogether, the Russian corporation produced 1.7 million barrels per day.

1.7 million barrels per day is practically the entire oil output of a country like Kazakhstan. If taken together, Kazakhstan currently produces around two million barrels per day. Last year, it was 1.8 million, so the figures are comparable. Lukoil’s reserves at the end of 2021 (there are no more recent reports), according to independent estimates, reached 15.3 billion barrels of oil equivalent. KazMunayGas’s proven reserves are around four billion barrels. So Lukoil’s reserves are at least four times greater than KMG’s. The same applies to output: KMG produces about 550,000 barrels per day, while Lukoil produces three times more, Narymbetov emphasized.

The loss of assets in Kazakhstan will thereby not be significant for Lukoil. 

It is rather more interesting what KazMunayGas (KMG) might gain from the situation. In the case of Tengizchevroil and Karachaganak Petroleum Operating, the most likely option is that KMG will buy out Lukoil’s shares.

Under the law, the national company has priority when such assets are transferred.

If Lukoil sells its assets in Kazakhstan, the new owner will most likely be KazMunayGas. The national company has the preemptive right to buy them. For example, Lukoil’s share in Tengiz is five percent, while KMG already owns twenty percent. Most likely, KMG will exercise this right because Tengiz is the most desirable asset. It has the lowest production costs and still holds significant reserves for the future. It’s a very promising asset. The same goes for Karachaganak — KMG will use its preemptive right there as well, said Abzal Narymbetov.

Financial analyst Rasul Rysmambetov also reminded Orda.kz that KMG has the first right to purchase stakes in key fields.

Kazakhstan will likely take this opportunity to strengthen control over its own natural resources.

It will be more convenient for Lukoil to sell these assets — not to hand them over for management, but to completely exit as an owner and cease to be a beneficiary, the analyst said.

At the same time, the question arises whether the Russian company might try to circumvent Western sanctions.

It is in everyone’s interest to resolve the issue in compliance with international law.

In today’s digital world, trying to deceive OFAC is ridiculous. And if the state were involved, it would trigger the infamous secondary sanctions. So the best solution is to quietly buy back these assets. Trying to circumvent sanctions is absurd,Rysmambetov stated. 

Official Statement

On November 4, KazMunayGas issued an official statement regarding Lukoil’s assets. The national company reported that participants in joint projects with the Russian corporation are currently conducting a comprehensive assessment of potential external impacts on business — taking into account various legal, financial, and technical aspects.

However, no details were disclosed, as the discussions are being held behind closed doors.

Work on the projects continues as scheduled, in accordance with the current legislation of the Republic of Kazakhstan and contractual obligations. All agreements include a sanctions clause that defines the procedures to be followed in case of restrictive measures. The terms of these provisions are confidential, KazMunayGas emphasized.

A Warning Shot

According to Rasul Rysmambetov, the economic restrictions against Lukoil are a warning sign for other Russian companies with assets abroad.

Sanctions against Lukoil, against the backdrop of warring countries unwilling to enter peace talks, will only tighten. This applies not only to Lukoil but to other Russian companies as well. I believe that if the issue is not resolved within six months and peace negotiations do not begin, sanctions will extend to almost all Russian firms operating in Kazakhstan. As another Russian put it, Lukoil’s fate should be a cautionary tale for others. Rasul Rysmambetov.

The analyst emphasizes that for Kazakhstan, this is not a tragedy. It would be reasonable, he says, to initiate tripartite negotiations between OFAC, Kazakhstan, and Lukoil to determine how much the Russian ownership share in Kazakh assets must be reduced and how transactions should be structured under sanctions pressure.

Another issue is how the U.S. sanctions against Lukoil and Rosneft will affect Kazakhstan overall. 

Kazakhstan's economy is closely tied to Russia’s, and regardless of who ends up owning the foreign assets, the ricochet of sanctions pressure will inevitably hit Kazakhstan.

Financial analyst Arman Batayev notes that the U.S. measures against Lukoil and Rosneft will deal a heavy blow to Russia’s budget. Many counterparties are already reconsidering their relationships with these companies.

Indeed, Turkish refineries are reducing purchases of Russian oil and shifting partly to Kazakh supplies, while Germany is reportedly considering nationalizing the Schwedt refinery, which belongs to a Rosneft subsidiary.

Because of the sanctions on Lukoil and Rosneft, Russia’s federal budget could lose up to four trillion rubles in revenue. The countermeasures that the Russian financial regulator will be forced to take are expected to cause a surge in inflation — and that inflation will, in turn, be exported to Kazakhstan:

In the first year of the war, Kazakhstan imported up to 20 percent of its inflation through Russian goods and price shocks. Against that backdrop, the question of how to handle Lukoil’s stakes in joint projects becomes secondary, said Arman Batayev.

Original Author: Nikita Drobny