State-run ONGC Videsh Ltd (OVL) has sought legal opinion after the United States imposed sanctions on a Russian oilfield in which Indian companies collectively hold a 49.9 per cent stake, sources told PTI.
US President Donald Trump on October 22 announced fresh sanctions against two of Russia’s largest oil majors — Rosneft and Lukoil — as part of Washington’s push to pressure Moscow to end its war with Ukraine.
Under the new measures, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated several subsidiaries of the two Russian firms in which they, directly or indirectly, hold a 50 per cent or more ownership stake. Among those named in the sanctions list is CJSC Vankorneft, a Rosneft subsidiary that counts Indian companies as key minority stakeholders.
Indian stake below sanction threshold
OVL holds a 26 per cent stake in Vankorneft, while a consortium of Oil India Ltd (OIL), Indian Oil Corporation (IOC) and Bharat PetroResources Ltd (BPRL) together own 23.9 per cent. The remaining 50.1 per cent is held by Rosneft, giving it controlling ownership.
While a plain reading of the OFAC notification suggests that restrictions do not apply to entities with less than 50 per cent ownership by sanctioned parties, OVL has opted for caution. “OVL is seeking legal opinions from domestic and international law firms to ensure it does not violate any sanctions,” two sources with direct knowledge of the matter told PTI.
They added that, as per OFAC’s “50 per cent rule,” sanctions apply only to entities that are majority-owned — directly or indirectly — by designated persons. “The OFAC sanctions should not apply to Indian companies, as they do not hold a 50 per cent stake in Vankorneft,” the sources said.
Dividends, not crude, flow to India
Unlike operators of the field, Indian companies do not receive equity oil — their share of crude production proportional to ownership. Instead, they are entitled only to dividends from the joint venture’s profits from oil and gas sales. “Indian firms are not operators of the fields,” the sources said, adding that oil from Vankorneft is sold to international traders who then supply it to refineries worldwide.The Vankor field, located in Russia’s West Siberian Basin about 142 km from Igarka, spans 416.5 square kilometres. OVL, the overseas investment arm of state-owned ONGC, first entered the project in May 2016, acquiring a 15 per cent stake from Rosneft for USD 1.284 billion, followed by an additional 11 per cent in October that year for USD 930 million.
The OIL-IOC-BPRL consortium also joined the project in 2016, purchasing a 23.9 per cent stake for USD 2.02 billion. These deals together gave the Indian entities access to around 13.87 million tonnes of oil equivalent in total.
Due to previous rounds of Western sanctions, Indian companies have been unable to repatriate dividends earned from Vankorneft for the past three years. These accumulated earnings — estimated at USD 1.4 billion — remain parked in Russian bank accounts.
Given the potential for stricter enforcement under the new OFAC measures, OVL “wants to be 100 per cent sure it is not violating any sanctions,” the sources said.
Risks for global operations
The US Treasury Department, in a statement, said: “All property and interests in property of the designated or blocked persons that are in the United States or in the possession or control of US persons are blocked and must be reported to OFAC.” It added that any entities owned 50 per cent or more by blocked persons are also deemed blocked.
Unless authorized by OFAC, “all transactions by US persons or within the United States that involve any property or interests in property of blocked persons” are prohibited. Violations may attract civil or criminal penalties on both US and foreign entities.
For Indian companies, the risk of a technical violation could carry broader implications — including restrictions on overseas fundraising and US dollar transactions in international trade.
Even though Indian firms’ stakes in Vankorneft fall below the OFAC ownership threshold, the fresh sanctions have once again exposed the delicate balancing act faced by India’s state-run oil companies — navigating strategic energy interests in Russia while avoiding entanglement in the expanding web of Western sanctions.
