Russia on brink as oil giant has 'no future' and faces 'collapse'

Russian oil giant Lukoil faces being stripped of its foreign assets and the collapse of its overseas business. Experts have also warned the company has no "future", with little opportunity to compensate for lost revenues abroad by developing business in Russia

Lukoil and its rival Rosneft were recently hit with new biting sanctions by Donald Trump's administration. The White House move has a come as a major blow to Vladimir Putin, who relies heavily on income derived from energy taxes to fund his brutal war in Ukraine. Oil and gas revenue accounts for as much as a quarter of Russia's budget and is by far and away the most important source of cash for Moscow's military campaign, now in its fourth year.

Together Lukoil and Rosneft are responsible for nearly half of Russia's crude oil exports. Lukoil is also closely linked to Putin and depends heavily on its foreign assets to generate revenue.

In a bid to salvage its overseas business, the company agreed to divest its foreign operations to the Gunvor Group. The group is a commodities trading company with long-standing ties to Russia.

However, the White House blocked the move last week, saying it would withhold a licence for "the Kremlin's puppet" Gunvor to operate them.

As a result, Lukoil could now lose €14 billon (£12bn) of foreign assets, as Western companies and governments race to comply with US sanctions.

"Lukoil's owners are already bracing for the possibility that their assets could simply be taken away," a Russian oil market insider told the Financial Times.

The company has limited growth opportunities in Russia's domestic market, due to the prevailing dominance of Rosneft.

The competitor is headed by Putin's loyal ally Igor Sechin and the state-controlled Gazprom Neft.

Vladimir Milov, a Russian deputy energy minister in the early 2000s, said going abroad was no ,anger an option for the company.

The Navalny ally added: "Lukoil has no business future. It's a company with its wings clipped."

The company was forced to declare a 'force majeure" in Iraq, while its Burgas oil refinery in Bulgaria is in the process of being expropriated by the state.