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Traders depart from Geneva, Houston, Dubai offices

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Sanctions limit access to bank capital

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Litasco used to be one of world's top trading houses

By Ahmad Ghaddar, Shariq Khan and Robert Harvey

LONDON/NEW YORK, Nov 21 (Reuters) - U.S. sanctions are

dismantling what remains of Lukoil's Litasco, once

Russia's biggest oil trader and a rival to top Swiss houses and

oil majors, five sources told Reuters.

The measures, which also target state-owned Rosneft

, took effect on Friday as Washington seeks to choke

off Moscow's ability to fund its war in Ukraine. They have

thrown Lukoil's global operations into limbo, from oilfields in

the Middle East to fuel pumps and refineries across Europe.

Cut off from the global financial system, Litasco has

dismissed most traders and operational staff, offering about

three months' severance and bonuses, the sources said.

Oil trading requires billions of dollars in credit, now out

of reach. A handful of employees will remain to handle

administrative tasks.

Litasco and Lukoil did not immediately reply to a Reuters

request for comment.

LITASCO SHUTS DOWN GLOBAL OFFICES

Crude oil traders and other staff are set to depart

Litasco's Swiss headquarters in Geneva by the end of this week,

according to three sources. The office is expected to be fully

shut by the end of February, a fourth source said.

In the U.S. offices in Houston, most of the firm's 20-odd

traders and operational personnel departed on Thursday, two

sources said. A few employees will stay on to unwind remaining

commitments with suppliers and customers, they said.

In the UAE offices in Dubai, employees have been served

notice but will be employed until February, one source said.

Founded in 2000, Litasco was among the top global oil

trading firms in its heyday, moving oil and fuels for Lukoil's

assets around the world as well as trading third-party barrels.

SHADOW FLEET MAY BECOME LIFELINE

Litasco traded just under 4 million barrels per day (bpd) of

crude and fuel in 2019, or about 4% of global consumption at the

time.

It competed with oil majors and trading houses alike,

poaching some of their top talent.

Litasco's winding down will drive Russian oil trading

further underground, said Adi Imsirovic from consultancy Surrey

Clean Energy, and former head of oil trading at Gazprom trading.

Moscow relies heavily on a shadow fleet of aging tankers

to ship crude despite sanctions.

"It is possible to bounce back, but it requires money, time

and patience," Imsirovic said.

Russia had to reroute most of its oil exports to Asia from

Europe due to U.S. and EU sanctions.

Litasco took a big hit in 2022 when the West clamped down on

Russia's oil industry over Moscow's invasion of Ukraine but it

tried to rebuild operations in recent years hiring U.S. traders

and securing credit lines.

"Litasco obviously has to close given the sanctions.

Russian oil will get to refiners one way or another but traders

need access to dollars and the global financial system," said

energy economist Philip Verleger.

(Editing by Dmitry Zhdannikov and Louise Heavens)