By Laura Sanicola and Julia Payne
(Reuters) – The Swiss trading arm of Russian energy giant Lukoil has scaled back operations after the oil company cut its supply of capital to guarantee nearly $1 billion in margin calls in the wake of Western sanctions, according to three people familiar with the matter.
Litasco, which was handling more than 3.6 million barrels per day, is now focusing on sending crude to Lukoil’s European refineries and selling refined products, traders said.
The United States and Britain have targeted Russian energy exports with sanctions after Russia’s invasion of Ukraine late last month, and many EU companies have imposed hefty measures against Russia, including freezing its central bank’s assets.
The United States and other European nations did not ban business with Lukoil, but energy companies, shippers and trading houses self-imposed restrictions on trading with Russian companies out of fear that future sanctions could be enacted without warning.
Russian companies and major buyers of Russian oil have been unable to open letters of credit from Western banks to cover purchases.
Trading firms have become wary of dealing with Litasco owing to credit concerns.
Litasco was told to stop hedging crude oil in an effort to preserve cash, two sources told Reuters.
Lukoil did not respond to requests for comment. Litasco said that as a subsidiary of the publicly traded Lukoil it “does not comment on rumors, business, commercial or political-related matters.”
Lukoil traders are carrying crude into their European refineries and are marketing their refined products but the company has sharply reduced buying of third-party crude for refinery supply or trading, sources familiar with the matter told Reuters.
Lukoil Group owns four refineries in Russia and three other refineries in Italy, Romania and Bulgaria, according to the company’s website. It also has a 45% interest in a refinery in the Netherlands. The aggregate capacity of these refineries is 80.4 million tonnes, according to the company.
Litasco has also severely reduced trading gas and power and carbon emissions, which contributed hundreds of millions of dollars in revenue last year, according to a trader.
All fuel trading of gasoline and diesel is done by the Litasco trading arm. Litasco will likely retain traders associated with its core energy assets, a senior trading source told Reuters.
(Reporting by Laura Sanicola in Washington and Julia Payne in London; Editing by David Gaffen and Matthew Lewis)
