Lukoil’s ex-chief warns against EU ban on ‘irreplaceable’ Russian oil

The former head of Russia’s second-biggest oil group has warned that a European ban on the country’s “impossible to replace” crude would be “the most negative scenario” for all parties as EU discussions on an embargo intensify.

Vagit Alekperov, who stepped down as chief executive of Lukoil last month after he was hit by western sanctions, told the Financial Times that any EU move to cut off Russian oil imports would be “a shock for everyone”. 

“By imposing sanctions, western countries gave a clear signal and declared their position. There is no need to further tighten them,” the billionaire said in his first press interview since stepping down.

Alekperov’s comments come amid fierce debate in the EU — which relies on Russia for a quarter of its oil imports — on whether to instigate an oil ban that would ratchet up the pressure on Moscow but exacerbate Europe’s energy crisis.

European Commission president Ursula von der Leyen wants the EU to stand alongside G7 partners including the US, which imposed oil sanctions in March. But a push to include an oil ban in the EU’s sixth package of measures against Russia has run into opposition from Hungary, which says it cannot afford to find alternative fuels.

Alekperov acknowledged that an oil import ban would mean “Russia will have to reduce production, freeze wells, as we did at the beginning of the pandemic in 2020, because it is impossible to redirect all European volumes to other markets overnight”.

But he warned that for the EU, “it is impossible to replace such a major energy exporter as Russia, even in the medium term”.

Building new infrastructure to redirect Russian crude currently flowing to Europe would take years, Alekperov said, particularly in an environment where the global industry had already lost “hundreds of billions, trillions of dollars” of investment in recent crises.

“Military conflicts can end quickly, while the energy configuration of the world has been set by decades of investment and hard work of many generations of professionals,” he added. “There is no need to undermine or destroy it.”

Referring to declining energy security and rising prices in the wake of Russia’s invasion of Ukraine, he said: “This is not a natural process, such as decarbonisation, and not a short-term consumption crisis as in the coronavirus pandemic. This is a very severe energy crisis with negative long-term consequences for all market participants.”

The commission has offered €2bn in loans to Hungary and other central European states to adapt their infrastructure as part of its €210bn RepowerEU plan to attain energy independence from Moscow.

Alekperov was one of the longest-serving oil executives in Russia until UK and Australian sanctions against him prompted him to step down from Lukoil after 30 years at the helm.

Hailing from Azerbaijan, where he worked as an oilman before moving to manage oilfields in Siberia and then to the Soviet oil and gas ministry, Alekperov founded Lukoil by uniting three of the largest Soviet oilfields in 1991. The company was in the top three global oil producers in 1992.

Alekperov saw it through its 1993 privatisation, a London listing and the transition to international reporting standards. The LSE suspended trading in Lukoil shares in March.

He retains an 8.5 per cent stake directly or via family trusts or investment funds. Forbes estimated his wealth in May at $22bn, down from almost $25bn last year.

Like other Russian businesses, Lukoil has been hit by various western measures targeting Russia’s economy. The company warned last month it may need to shut refineries because of its reduced ability to sell oil products abroad or store them domestically.

Alekperov was targeted with sanctions for what the UK government described as benefiting from or continuing to support the Russian government. But he insisted Lukoil and its management had no influence over political decisions or processes.

His decision to step down “was made for the sake of the company, although I won’t hide it, it was a sad one for me”, he said.

“We see that sanctions are often of chaotic, emotional nature,” he said. “They affect people who make no political decisions, have no political influence. Let alone the factual mistakes in them, in last names, titles, or reasons for being sanctioned. It doesn’t look serious from the legal standpoint at the very least and negates the importance of these measures in the eyes of the public.”