On October 22, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sweeping new sanctions targeting Russia’s energy sector, citing the Kremlin’s continued refusal to engage in good-faith negotiations to end the war in Ukraine. The action designates Russia’s two largest oil companies, Rosneft Oil Company (Rosneft) and Lukoil OAO (Lukoil), along with dozens of their subsidiaries, pursuant to Executive Order 14024. As a result, all property and interests in property of both Rosneft and Lukoil are blocked if they fall under U.S. jurisdiction or are controlled by U.S. persons. Crucially, this blocking extends automatically to any entity that is 50% or more owned, directly or indirectly, by Rosneft or Lukoil — even if that entity has not been specifically designated by OFAC.
Concurrently with these designations, OFAC issued Russia-related General License 124A, “Authorizing Petroleum Services and Other Transactions Related to the Caspian Pipeline Consortium and Tengizchevroil Projects;” Russia-related General License 126, “Authorizing the Wind Down of Transactions Involving Rosneft or Lukoil;” Russia-related General License 127, “Authorizing Certain Transactions Related to Debt or Equity of, or Derivative Contracts Involving, Rosneft or Lukoil;” and Russia-related General License 128, “Authorizing Certain Transactions Involving Lukoil Retail Service Stations Located Outside of Russia.”
General License 124A
GL 124A creates a project-specific safe harbor for the Caspian Pipeline Consortium (CPC) and Tengizchevroil (TCO). When related to these projects, it authorizes (i) petroleum services that would otherwise be barred by the January 10, 2025, E.O. 14071 determination; and (ii) transactions otherwise prohibited by E.O. 14024 when they involve Rosneft, Lukoil, or entities they own ≥50% (directly or indirectly, individually or in the aggregate).
In addition, GL 124A clarifies that the license does not authorize any other transactions prohibited by the Russian Harmful Foreign Activities Sanctions Regulations, 31 C.F.R. part 587 (RuHSR), including dealings with other blocked persons, unless separately authorized.
General License 126
GL 126 authorizes transactions ordinarily incident and necessary to wind down dealings with Rosneft, Lukoil, and entities they own ≥50% of through 12:01 a.m. EST, November 21, 2025; payments to a blocked person must go to a blocked account; excludes Directive 2 and Directive 4 activity, as well as other RuHSR-barred dealings.
General License 127
GL 127 authorizes, through 12:01 a.m. EST, November 21, 2025, (i) divestment/transfer to non-U.S. persons of debt or equity issued/guaranteed by Rosneft, Lukoil, or their ≥50% affiliates; (ii) facilitation/clearing/settlement of trades placed before 4 p.m. EDT, October 22, 2025; and (iii) wind-down of derivative contracts entered before that time, with payments to blocked persons in connection with derivatives required to go to blocked accounts. In addition, U.S. persons may not sell to blocked persons or purchase or invest except as ordinarily incident and necessary to divestment. The other prohibitions in Directive 2/4 and other RuHSR continue to apply.
General License 128
GL 128 authorizes, through 12:01 a.m. EST, November 21, 2025, the purchase of goods/services from, and the maintenance, operation, or wind-down of, Lukoil retail service stations located outside Russia and in existence on or before October 22, 2025; payments to any blocked person, other than the stations themselves, must go to a blocked account; and excludes Directive 2/4 and other RuHSR prohibitions.
Foreign Financial Institutions and the Secondary Sanctions Risk
As OFAC has specifically warned, the sanctions on Rosneft and Lukoil create significant secondary sanctions risks for foreign financial institutions and other non-U.S. entities that continue to transact with them. Such measures may include blocking or imposing strict conditions on an institution’s ability to open or maintain a correspondent account in the United States, effectively cutting them off from the U.S. financial system and global dollar transactions. In our view, these potential secondary sanctions are aimed at deterring international flow of funds to Rosneft and Lukoil and degrading Russia’s capacity to finance its military actions.
More broadly, OFAC made clear that foreign financial institutions that conduct or facilitate significant transactions or provide any service involving Russia’s military-industrial base, including any persons blocked pursuant to E.O. 14024, run the risk of secondary sanctions.
Compliance Considerations
U.S. companies and financial institutions, particularly those with exposure to the Russian energy sector or who engage in international trade, finance, or logistics, should:
- Perform a comprehensive risk assessment of extant operations and contractual relationships.
- Thoroughly screen all counterparties and transactions to identify any direct or indirect affiliations with Rosneft, Lukoil, or their subsidiaries.
- Examine existing agreements and supply chains for prospective vulnerabilities arising from the newly designated entities.
- Amend internal sanctions compliance protocols and systems to incorporate the recent designations.
- Fulfill reporting obligations to OFAC with respect to any blocked property, in accordance with applicable U.S. sanctions regulations.
- Vigilantly monitor relationships with foreign financial institutions to mitigate risks associated with secondary sanctions.
- Ascertain whether ongoing activities are encompassed within the scope of the above general licenses. If the activities are not covered by an existing general license, companies may want to consider applying for a specific license from OFAC.