Italy considers asking for EU embargo waiver to save Lukoil refinery

Rome: – Italy is considering several options to save a Lukoil-owned (LKOH.MM) refinery in Sicily, including asking the European Union for a temporary waiver on upcoming sanctions on Russian oil, the country’s industry minister said on Friday.

A European embargo on seaborne Russian oil comes into effect on Dec. 5 and the Italian government is trying to keep the ISAB plant in Sicily operational and avoid risks to jobs and a loss of refining capacity.

ISAB refines a fifth of Italy’s crude and employs about 1,000 workers, whose representatives met the government on Friday along with company executives, as workers demonstrated in Sicily.

Adolfo Urso, industry minister in Prime Minister Giorgia Meloni’s administration, said Italy could ask the European Union “for an exemption, even temporary, to the embargo,” which would allow the government to buy time and keep the refinery afloat.

But Urso said the “first way” for the government would be striking a deal with the banks to provide financing for the plant.

“We will discuss with banks whether they are open to finance ISAB if state agency SACE extends guarantees,” he told reporters following the meeting.

Banks are seen as reluctant to deal with a Russian entity although Lukoil and its Swiss subsidiary Litasco, which control the refinery, are not subject to sanctions in Europe.

A source close to the matter said under current EU regulations SACE would be ready to guarantee up to 90% of the financing amount.

Direct state support for the plant was also an option, Urso said, referring to Germany, which in September took control of a refinery owned by Russian oil firm Rosneft (ROSN.MM).

Litasco, Lukoil’s Swiss subsidiary, last month rejected a preliminary bid from U.S. fund Crossbridge. Urso said any potential buyer would have to abide by conditions laid down to protect Italy’s national interest.

Such conditions would be established through the so-called golden power, a special mechanism the Italian government can use to block foreign takeovers of assets the country considers strategic.

Sources said Rome was also pushing Lukoil’s Litasco to provide oil and financing beyond the December deadline. Lukoil did not respond to a request for comment on this on Thursday.