Russian Lukoil rejected the offer sell its Italian refinery to an American private equity group in a decision that risks bankrupting the Sicilian plant and costing thousands of jobs.
Commodity trader Vitol has offered financing to Crossbridge Energy Partners to help it acquire the Priolo refinery after the Russian group raised concerns about the US buyout group’s ability to pay for the deal.
However, Lukoil is reluctant to sell to a US buyout fund, according to several people close to the negotiations. Vitol was willing to give Crossbridge a loan at a price better than the US group could get from a traditional lender because it benefited from oil supplies to the Italian refinery.
The deal would help avoid Italy nationalizing the Sicilian plant, which is struggling with a slump in oil supplies, when EU sanctions targeting Russian offshore oil exports come into force next month.
Before the war in Ukraine, the refinery obtained oil from various countries, but lenders stopped providing financing after The EU imposed sanctions on Moscow forcing the refinery to rely solely on its Russian parent company for oil.
A sale to non-Russian owners would allow the plant, which supplies 22 percent of Italy’s road fuel, to seek alternative sources of oil.
Economic Development Minister Adolfo Urso said the government was working to avoid shutting down the plant, with nationalization among the options on the table.
Italian officials close to the talks said the ISAB Lukoil refinery had asked a group of banks for €700m in financing because it was struggling to pay its energy bills; however, Italian banks are reluctant to take such a risk.
Publicly backed lender SACE could provide part of the loan to ISAB Lukoil, the people said. But the banks are refusing to budge, according to two Italian officials, even after the director general of the Italian finance ministry, Alessandro Rivera, sent them a “comfort letter” to confirm that the company and its owners are not targeted by EU sanctions.
“If the Russians don’t want to sell to the Americans and the banks refuse to reopen credit lines, what remains is nationalization,” one Italian official said.
Several European countries have decided to nationalize Russian-owned energy assets to keep prices low and save jobs. Italy has so far refused to explore the nationalization of the Lukoil plant despite threats to domestic jobs and fuel supplies.
The Sicilian plant employs more than 1,000 people in one of the poorest regions of the country and indirectly supports thousands of jobs in satellite activities in the area.
Diego Bivona, president of the Sicilian branch of Italy’s national industry body Confindustria, told local media “nothing has happened in recent months and it is not clear how anyone wants to solve this problem, which is not only local but national and strategic”.
The Financial Times reported in September that Crossbridge had become the frontrunner to acquire the refinery after spending 12 days conducting due diligence on Lukoil’s ISAB facility.
The buyout firm explored a joint bid with Vitol, but at the time the US firm said it preferred to buy the asset on its own.
Vitol and Crossbridge also held talks with members of the previous government led by Prime Minister Mario Draghi, but failed to achieve a breakthrough.
According to Italian media reports, the latest order for Russian oil will be submitted on Monday.
Vitol and SACE declined to comment. Italy’s finance ministry did not immediately respond to a request for comment. ISAB Lukoil did not respond to a request for comment.