INSIGHT-Lukoil fire sale marks failure of Russia's $800 billion bet to go global

By Anna Hirtenstein and Dmitry Zhdannikov

LONDON, March 5 (Reuters) - In 2014, following Russia's invasion of Crimea, the billionaire founder of Lukoil took a fateful bet that cut against the advice of Vladimir Putin and set him apart from other Russian tycoons.

Vagit Alekperov and other top Russian businessmen had been urged by President Putin at a closed-door meeting in March of that year, weeks after the invasion, to sell their assets in the West or risk them being confiscated by authorities there, according to two Lukoil sources familiar with the gathering.

After a few months of deliberation, though, Alekperov decided to hold onto Lukoil's vast collection of international interests, including oilfields, refineries and petrol stations, even as many of his fellow magnates were selling up, the people said.

At a meeting in the company's Moscow HQ, Alekperov told his management team to scrap any plans to spin off or sell the assets, assuring them the sheer size of Lukoil's global portfolio effectively made it sanctions-proof, according to the two sources who requested anonymity to discuss the sensitive discussions, which haven't been previously reported.

Fast-forward 12 years, and Alekperov's international strategy has soured.

The 75-year-old's bet that Washington would not impose sanctions on Lukoil's assets, because of the disruption that would cause to the global energy system, had held for more than a decade, even after Russia's full-scale invasion of Ukraine in 2022.

Yet his predictions ultimately failed to reckon with an unpredictable U.S. president, Donald Trump, who imposed sanctions on Lukoil in October as he tried to increase pressure on Putin to negotiate a peace deal to end the war.

The measures made it impossible for Russia's top independent oil producer to operate internationally and forced the company into a fire sale of assets stretching across around 30 countries. The U.S. Treasury is overseeing the sale of the portfolio, valued by Lukoil at $22 billion. Last week, it extended the deadline for deals to be concluded to April 1.

The assets cost Lukoil around $40 billion to accumulate over the past two decades but have depreciated over time, according to the two company sources.

Lukoil didn't respond to a request for comment for this article, while Reuters was unable to contact Alekperov directly.

Kremlin spokesman Dmitry Peskov denounced the seizure of assets owned by Russian companies.

"Property rights violations in Western countries undermine trust in the reliability of these countries not only for Russian businesses affected by sanctions but also for businesses in other countries," Peskov told Reuters.

Lukoil is one of the last major Russian companies to retreat from the West, and the asset sales mark a turbulent final chapter in a story spanning decades of rampant Russian investment overseas following the collapse of the Soviet Union.

Between 2000 to 2021, Russia saw capital outflows of $800 billion, with most of this money used for investments abroad, according to the country's central bank and Reuters calculations.

Last year, total Russian investments abroad stood at just $193 billion, central bank data shows.

"Speaking of the West, the damage done to us won't be forgotten for a long time," Andrei Kostin, head of Russian state bank VTB, told Reuters in a December interview.

"It will be a very long process - both letting Russians back to the West and the return of assets to the Russian companies."

VTB, which was forced to relinquish its network of businesses in America and Western Europe in 2022, has estimated its sanctions-related losses amount to $8 billion.

PUTIN: THAT IS EXACTLY HOW IT TURNED OUT

The new round of U.S. sanctions - including those targeting Lukoil, which accounts for about 2% of global oil output, as well as Russian state oil giant Rosneft - has caused some disruption to Russian flows, according to analysts, traders and shipping data. They say those measures, and the anticipation of the U.S. strikes on Iran, have helped push up oil prices in recent months.

"During the Biden administration, there was always the tension between reducing Russia's energy revenue and not destabilising international energy markets," said Geoffrey Pyatt, who was assistant secretary of state for energy resources under Trump's predecessor Joe Biden and is now a senior managing director at consultancy firm McLarty Associates.

"I give the Trump administration credit for biting the bullet. And the fact is that they were able to implement these sweeping sanctions against the two largest Russian entities and it didn't cause a spike in crude prices."

In Putin's 2023 State of the Union speech - his first since the full-scale invasion of Ukraine a year earlier triggered new U.S. and EU sanctions - the president stressed that he had warned Russian businessmen that the West would eventually deprive them of their assets.

"And that is exactly how it turned out to be," he said.

Two decades earlier, the Russian leader had played a central role in promoting Lukoil's international ambitions. In 2003, flanked by Alekperov and U.S. Senator Chuck Schumer, Putin inaugurated a Lukoil gas station in Manhattan, New York.

Now Lukoil's international empire is on the block, with bidders for the portfolio including the U.S. oil major Chevron and Texas-based Quantum Capital Group, American private equity fund Carlyle Group and Saudi investor Midad Energy.

If all the sales close, Lukoil would be transformed overnight from a global energy giant to a domestic producer. Its earnings would fall by about 20%, according to analysts at Renaissance Capital and Sinara Bank.

The company has already lost nearly half of its market value from its peak in 2020 and is now worth almost $50 billion.

CHELSEA FC, NY YANKEES, MEGAYACHTS

It's been a rollercoaster ride.

Lukoil was one of many Russian companies and businessmen funnelling huge investments abroad as they spent cash they built up during a commodities boom in the 2000s when rapid economic growth in China boosted prices for many raw materials.

Russian investors snapped up refineries, steel plants, sports teams such as Chelsea Football Club and New York Yankees, and hundreds of properties in Europe and America. So-called oligarchs - led by the likes of metals magnates Alexei Mordashov, Oleg Deripaska, Alisher Usmanov and Roman Abramovich - took their place among the global elite with yachts and villas in exclusive locales such as Billionaires' Bay in Cap d'Antibes on the French Riviera and Italy's Sardinia.

The annexation of Crimea in 2014, and the eruption of the wider conflict in Ukraine in February 2022, ended the Russian foray into the global economy. Much of the West is no longer welcome to Russian business. The United States, European Union and Britain have imposed multiple waves of sanctions.

Many Russian companies have sold off interests at knock-down prices to avoid face possible nationalization and asset freezes, or have written them down.

Russia's largest lender Sberbank, for example, unloaded its European subsidiaries at a discount. Steelmaker Evraz sold its North American mills, which it had bought for $4.6 billion in 2007–2008, for $500 million last year.

Abramovich was forced to sell Chelsea Football Club when the Ukraine war erupted in 2022. A portion of the $5.7 billion of proceeds was put towards club investment and the remainder was frozen by Britain and earmarked for aid to Ukraine.

As of November 2025, an estimated 28 billion euros ($33 billion) worth of private Russian assets lie frozen in the EU, according to the European Commission.

Some Russian companies have sought to expand in friendlier nations. Sberbank and VTB operate branches in India and smaller Russian banks have announced plans to begin working in China. MTS Bank received a license to open a branch in Abu Dhabi in 2023, but UAE authorities revoked it due to sanctions.

VTB boss Kostin told Reuters that Russian companies still wanted to expand abroad but the focus had shifted towards the so-called global south of emerging markets, adding that many of his colleagues were thinking about commodities processing in China.

Asked about this shift, Kremlin spokesman Peskov said: "Naturally, Russian companies will seek out reliable and predictable options. As a state, we will protect the interests of our companies."