Reuters: US sanctions force Lukoil to cease operations in Iraq

Russian company Lukoil has declared force majeure on one of the world’s largest oil fields, West Qurna-2 in southern Iraq, Reuters reported, citing sources.

The move comes in response to U.S. sanctions imposed on Lukoil. In a letter to Iraq’s Ministry of Oil, the company stated that the current situation makes it impossible to continue operations. If the restrictions are not lifted within the next six months, Lukoil may completely halt production at the field.

According to the report, Iraq has suspended monetary payments to the company and cancelled a natural compensation of around 4 million barrels of oil.

A representative from Iraq’s Ministry of Oil clarified that funds accrued by Lukoil from its operations in the country will be frozen until the situation is resolved. Iraq cannot cooperate with companies under sanctions. 

If the reasons behind the force majeure are not resolved within six months, Lukoil will shut production and exit the project entirely, a senior Iraqi oil industry official said.

In October, US President Donald Trump imposed sanctions on Russia, targeting oil companies Lukoil and Rosneft as his frustration grows with Russian President Vladimir Putin over the war in Ukraine. The US Treasury Department said it was prepared to take further action as it called on Moscow to agree immediately to a ceasefire in Russia's war, which began in February 2022.

Trump, who had not sanctioned Russia over the war and instead relied on trade measures, imposed additional 25% tariffs on goods from India in retaliation for it purchasing discounted Russian oil.

By Khagan Isayev