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Italy secures U.S. guarantees to unlock funding for Lukoil refinery

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ROME — U.S. authorities have reassured Italy that its banks are not at risk of fines for breaching sanctions against Moscow if they help a Lukoil-owned refinery buy non-Russian oil, Italian Industry Minister Adolfo Urso said on Saturday.

The reassurance should help the Sicily-based ISAB plant, which the government may put in the hands of trustees, remain afloat after an EU embargo on seaborne Russian oil kicks in on Dec. 5, safeguarding local jobs and national fuel supplies.

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“We received a letter from U.S. authorities with guarantees that banks funding bridging transactions [to support ISAB] will not be subject to U.S. sanctions,” Urso told reporters on the sidelines of an event in the Sicilian city of Catania.

“I believe this is a historic step that can allow banks to operate with absolute confidence,” he added.

Urso said the government was working with a pool of banks on state-backed funding for ISAB with 100% guarantees from Treasury-owned credit export agency SACE and Sicily’s regional administration.

Following Russia’s invasion of Ukraine, ISAB has been forced to rely solely on Russian crude after creditor banks halted financing and stopped providing guarantees needed to buy oil from alternative suppliers.

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Lukoil is not affected by sanctions in Europe, but banks were still reluctant to deal with a Russia-related company as they feared being targeted by possible future fines in the United States, where the company has been subject to sectoral sanctions since 2014.

The Italian government adopted a scheme on Thursday allowing the refinery to be placed under trusteeship. A similar move was taken by Germany in September when it took control of a refinery owned by Rosneft.

In Catania, Urso said ISAB might go under “temporary” government control while Lukoil continues talks on selling the asset, adding that state-controlled Italian energy group Eni could be asked to support the trusteeship.

The government could call on “an oil company that operates in the sector, and it is obvious to everyone that this (company) could be Eni, and this will ensure continuity of production,” he said.

Asked whether the government could avoid putting the refinery under trusteeship if bank financing is unlocked, the minister told Reuters he thought it would be “more credible” to still proceed in such a direction.

On Friday, the Lukoil division that owns ISAB said the refinery could keep going despite the looming Russian oil embargo, relying on raw materials stored for the coming months and future deliveries of oil from countries other than Russia. (Reporting by Giuseppe Fonte and Alvise Armellini, Editing by Louise Heavens and Christina Fincher)

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