The owner of one of Britain’s biggest oil refineries has extended a loan facility with an arm of an oil company founded and part-owned by a Russian billionaire who is under sanctions.
Essar Oil (UK), which owns and operates the Stanlow oil refinery on Merseyside, stopped all imports of Russian fuel in 2022, in the aftermath of the invasion of Ukraine.
The decision came after unionised dockworkers refused to unload Russian cargoes at Stanlow, which supplies 16% of UK road fuel, while the government later imposed a ban on imports that might benefit the Kremlin.
Recently filed accounts reveal that the company has extended a credit facility with Litasco, the oil trading division of Moscow-based Lukoil, Russia’s second-largest oil company. Litasco itself is not subject to sanctions.
Essar Oil (UK) – part of the Essar Group owned by the Indian billionaire Ruia brothers – has a $500m (£393m) “extended payment facility” on crude oil with Litasco, the accounts show.
The agreement is effectively a credit line allowing Essar to buy fuel and pay later.
The two-year deal came to an end in May 2023 but has been extended until June 2024, before the money is paid back under an “unwind and settlement” agreement.
According to the accounts, $320m of a total $500m was due for repayment within 12 months as of the end of March 2023. Repayment will be funded by a combination of profits and new loans.
Litasco is wholly owned by Lukoil, whose founder and 8.5% shareholder was placed under sanctions by the UK in April 2022.
In its statement of reasons for sanctioning him, the British government said: “Through his directorship of Lukoil, Alekperov continues to obtain a benefit from and/or continues to support the government of Russia by working as a director […] of entities carrying on business in sectors of strategic significance to the government of Russia, namely the Russian energy sector.”
Lukoil is under sanctions in the US but not in the UK or EU, while Litasco is not under sanctions in any of the jurisdictions.
Alekperov stepped down as a director of Lukoil shortly after he was placed under sanction but remains an 8.5% shareholder.
A high court ruling handed down in November – part of a dispute between Litasco and a Senegalese oil company – found that neither Litasco nor Lukoil could be considered under the control of a sanctioned person.
During that case, a company called Le Mond Oil & Gas Africa argued that Litasco should be treated as if it were designated for sanctions because it was under the control of either Alekperov or Vladimir Putin.
Mr Justice Foxton dismissed this argument, noting that although Putin could take control of Litasco should he decide to do so, he did not exert any influence over the company.
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He added that it was “wholly improbable” that a payment made to Litasco would benefit Putin.
A spokesperson for the company said: “EOUK took immediate action to stop all Russian diesel imports many months ahead of the government deadline and our peers in the sector, by identifying alternate sources and ramping up our own production. We do not import any fuel of Russian origin.
“We operate at all times in line with sanctions legislation. Our focus now is very much on the massive opportunity presented by the energy transition and our ambition to become the world’s first low carbon refinery, while also making Stanlow the catalyst for the broader decarbonisation of the north-west.”
Essar Oil (UK)’s loan arrangement with Litasco has previously raised concerns in Westminster because the contract gives the company a charge over Stanlow Terminals Ltd.
In theory, this means the terminal, a vital piece of the UK’s energy infrastructure, could fall into Litasco’s hands if Essar Oil (UK) were to default on its debts.
The impact of the pandemic on Essar’s finances led to disquiet among government figures about the arrangement in 2021, when the company was wrestling with debts to HM Revenue and Customs.
Fears for its financial health persisted after its losses deepened from $221m to $321m in 2021. has always insisted that its finances are robust and that Litasco has no influence over the Stanlow terminal.
It has since returned to profitability, reporting a $66m post-tax profit in 2023, largely because of a $56m tax credit.
