The two biggest deals of Torbjörn Törnqvist’s life have happened because of US sanctions.
In 2014, sanctions on his Russian partner handed him control of the energy trader they’d co-founded. Now eleven years later, the billionaire head of Gunvor Group is again seizing on an opportunity created by American sanctions with a company-transforming deal that taps into a history of close ties in Russia — but needs goodwill in Washington to succeed.
If he can pull it off, Gunvor’s purchase of the international assets of Lukoil PJSC, Russia’s second-largest oil producer, will catapult the energy trader into the big leagues of oil production, from a standing start to pumping roughly the same number of barrels as the nation of Ecuador, according to Bloomberg calculations. Its refining capacity would nearly quadruple, and it would become the owner overnight of a sprawling network of gas stations spread across the US, Europe and Turkey.
It’s a massive undertaking for a company whose business is still almost entirely focused on the middleman role of buying, selling and shipping commodities.
Speaking for the first time since the deal was announced, Törnqvist on Tuesday told Bloomberg TV that Lukoil’s international trading and refining businesses could boost Gunvor’s own position at a challenging time for the industry, hinting as well that some of the vast portfolio may be “better preserved in other hands.”
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The deal comes with an ironic twist: If Törnqvist succeeds, the Lukoil purchase would mean that one of the biggest winners of the latest sanctions on Moscow would be a company that the US once accused of being part-owned by Vladimir Putin.
“It’s definitely exceptional — and it really raises a lot of questions,” said Maximilian Hess, founder of political risk consultancy Enmetena Advisory and the author of Economic War: Ukraine and the Global Conflict Between Russia and the West. “The real question I would have is: has Gunvor convinced the Kremlin that they will have influence and told the West that they don’t?”
Törnqvist said on Tuesday that the deal was “a clean break,” and that Lukoil would not have any option to buy back the assets it was selling. “Once it’s done, that’s it: We have nothing to do with Lukoil anymore.”
Asked if the White House would be satisfied that the deal wouldn’t benefit Russia, he replied: “We are assuring them that this is not the case.”
Törnqvist refused to discuss the valuation of the deal in the interview Tuesday, and Lukoil hasn’t disclosed it either. Lukoil International reported an equity value of roughly $21 billion (€18 billion) in 2023, more than three times Gunvor’s own equity value, though the distress created by the sanctions would suggest a substantial discount is likely. The company hasn’t provided any details about funding for the deal.
The speed with which the deal was announced — just one week after the US hit Lukoil with sanctions — has raised eyebrows across the industry. Several energy firms contacted Lukoil following the sanctions news to ask about buying assets but were rebuffed, according to people familiar with the interactions.
Crucially, the purchase will require sign off from the US government. Gunvor has already started discussions with representatives of the Treasury Department, and while there are some concerns about Russian influence on the company, officials also acknowledge that Gunvor has had constructive relations with the US on issues like the price cap imposed by Western governments to squeeze Moscow’s oil revenue, according to people familiar with the matter, who emphasized that the process is at a very early stage.
Treasury officials are seeking information about how the company’s relationship with Putin has evolved, the people said.
Treasury representatives didn’t immediately respond to requests for comment.
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If Gunvor keeps all of Lukoil’s international assets, it would represent a significant shift in business model. While trading houses like Glencore Plc moved away from a pure merchant business years ago, owning large upstream assets like oilfields also comes with risks, tying the company’s fortunes to the commodity price cycle and locking up capital for years or even decades. For Törnqvist, 71, the deal is likely to revive longstanding questions about succession planning.
Big break
Gunvor in its current form was founded in 2000 by Törnqvist, a Swedish national, and Gennady Timchenko, a Russian oil trader with ties to Putin – who was elected president the same year.
Named for Törnqvist’s mother, the trader’s big break came in the early 2000s, when the Russian government dismantled privately-owned Yukos Oil and threw its billionaire owner in jail. Gunvor was one of the traders called on to market significant volumes of crude oil as Russia sought to keep the barrels flowing. Soon it was the biggest trader of Russian oil, at one point handling around 30% of the country’s exports.
When Timchenko was hit by US sanctions in 2014, Gunvor announced he had agreed to divest his 44% stake in the firm a day before. Törnqvist now owns around 85% of the company, with the rest held by Gunvor employees.
Announcing the sanctions at the time, the US Treasury said that Timchenko’s activities in the energy sector “have been directly linked to Putin,” and that “Putin has investments in Gunvor and may have access to Gunvor funds.”
Gunvor angrily denied the claim, and its representatives spent years in Washington trying to persuade policymakers that it had no connections to the Russian president. The company hosted a team of Office of Foreign Assets Control analysts at its Geneva offices to discuss the impact of sanctions in 2023.
When the European energy crisis – prompted by Russia’s invasion of Ukraine – delivered record-breaking profits across the commodity-trading industry in 2022, Törnqvist was well-positioned to benefit. While bigger competitors like Vitol Group and Trafigura Group notched up higher profits than Gunvor, Törnqvist’s 85% stake in his company meant that he was one of the single largest individual beneficiaries from the boom, in which Gunvor raked in $4.3 billion in profits in three years.
Today it trades enough oil daily to meet demand from the UK and France combined, and of the trading houses has one of the biggest portfolios of liquefied gas. Like most of its peers, the company has been reinvesting some of its windfall profits into buying stakes in fixed assets, from a gas power station in Spain to a fuel distribution network in Pakistan.
‘Something bigger’
When the US government announced sanctions on Rosneft PJSC and Lukoil last month, Törnqvist was once again well positioned.
He was already in talks with Lukoil to buy certain assets, he told Bloomberg. “Clearly it evolved into a discussion… Could we do something bigger?”
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The sanctions news sent crude prices jumping and left host governments and partners scrambling to assess what the penalties would mean for Lukoil’s long list of investments outside of Russia. Its giant Geneva-based trading arm Litasco was immediately shunned by banks and other commodity groups.
On 27 October, less than a week after the sanctions were announced, Lukoil released a statement announcing it planned to sell its international assets. Two and a half days later, the company said it had accepted an offer from Gunvor, and agreed not to engage with any other buyers.
The rapid deal shocked the market, and also came as a surprise to many of Gunvor’s employees, who received the news via an internal email.
Several parties — including major commodity trading houses and national oil producers — made inquiries to Lukoil after its announcement that it would sell its portfolio, only to be told a deal had already been arranged, according to people familiar with the matter.
In response to questions, a Gunvor spokesperson reiterated that the company was already in touch with Lukoil about certain assets when the sanctions was announced, and said that there were multiple parties considered for the transaction, not just Gunvor. Lukoil didn’t immediately respond to a request for comment sent during a public holiday in Russia.
“Gunvor has been well positioned, and it’s unlikely that this happened overnight,” said James Lowrey — a strategic advisor who formerly headed Sumitomo Mitsui Banking Corporation’s commodity finance analysis and risk stream globally said of the deal. “These kinds of conversations will have been had because of the relationships Gunvor has had in Russia and still has in the region.”
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Incorporating Lukoil’s international assets would transform Gunvor from having zero upstream capacity to around 440,000 barrels of oil and condensate, according to Bloomberg calculations – nearly as much as Diamondback Energy Inc., one of the Permian Basin’s biggest independent producers.
As well as refineries and thousands of petrol stations, Lukoil has major production assets across Central Asia, the Middle East, Mexico and Africa.
In Kazakhstan, it holds a 5% stake in the giant Chevron-led Tengiz oilfield and 13.5% in Karachaganak. In Azerbaijan, it owns 20% of the BP-led Shah Deniz gas field that has become a key source of supplies to Europe. And in Uzbekistan it has significant gas assets that helped it produce 16.2 billion cubic meters of gas from its non-Russian assets last year.
But it’s in Iraq where its presence is greatest. Lukoil operates and holds a 75% stake in the giant West Qurna 2 oil project near Basra in the south of the country. The field was pumping more than 480,000 barrels of crude a day in April, according to Interfax.
“This is transformational for Gunvor, it’s not just the crude oil production and the refining – it’s a massive, integrated network of assets,” said Lowrey. “This will stretch their enterprise in every way possible.
The deal also raises questions about the future of Gunvor, including as the company continues to face questions about succession. Glencore’s expansion into owning more production assets in the 2000s helped push the trading house towards an initial public offering, while other energy producers including Abu Dhabi National Oil Co. have expressed interest in the past in buying all or part of Gunvor itself. Still, Törnqvist said in the TV interview that the deal would have ‘nothing’ to do with his 85% stake in the firm.
Törnqvist hinted that Gunvor may seek to sell some of the upstream holdings, saying that Lukoil’s “trading-related” assets in downstream and refining were the parts of the business he was most confident would fit into Gunvor’s portfolio. He added that it was still too early to speculate.
He said the Lukoil deal could help Gunvor navigate a less-profitable trading environment, with profits falling 71% drop in profits in the first half.
“What we’re now trying to do with Lukoil is obviously giving a network around our trading,” he said.
