*

Britain targets Russia's Lukoil and Rosneft oil companies

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Aims to cut Kremlin revenues for funding Ukraine war

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Companies considered strategically significant to Russia

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Traders say measures will disrupt shipping and insurance

for

Russian oil

(This October 15 story was updated on October 16 to add

sanctions imposed on China's refineries, ports in paragraphs

7-9)

By Sam Tabahriti and Muvija M

LONDON, Oct 15 (Reuters) - Britain targeted Russia's two

largest oil companies, Lukoil and Rosneft, and 44 shadow fleet

tankers on Wednesday in what it described as a new bid to

tighten energy sanctions and choke off Kremlin revenues.

Lukoil and Rosneft were designated under Britain's Russia

sanctions laws for what London described as their role in

supporting the Russian government. They are subject to an asset

freeze, director disqualification, transport restrictions, and a

ban on British trust services.

The two companies were considered strategically significant

to the Kremlin, the government said, adding that their

activities were of economic importance to Russia, contributing

to state revenues that help sustain its war in Ukraine.

BRITAIN WILL TRY TO STOP MOSCOW FROM FUNDING WAR

"We are introducing targeted sanctions against the two

biggest oil companies in Russia, Lukoil and Rosneft," Britain's

finance minister Rachel Reeves told reporters while on a trip in

the United States.

"At the same time, we are ramping up pressure on companies

in third countries, including India and China, that continue to

facilitate getting Russia oil onto global markets."

Also designated by London were Chinese refiner Shandong

Yulong Petrochemical and several port operators - Shandong

Jingang Port, Shandong Baogang International and Shandong Haixin

Port, all in the refining hub of Shandong.

Yulong Petrochemical, a joint venture between private

aluminium smelter Nanshan Group and provincial government-backed

Shandong Energy Group, is China's newest refiner with processing

capacity of 400,000 barrels per day. It is one of the largest

Russian oil buyers by refinery, according to traders.

Yulong Petrochemical did not respond to a request for

comment.

Russia's embassy in London said the sanctions would

backfire by destabilising global energy markets and pushing up

costs for British businesses and consumers.

"Contrary to the loud assurances of British leaders, these

restrictions will not have any impact on the Russian foreign

policy course," the embassy statement said.

Reeves said there was "no place for Russia in global

markets" and that Britain would take all necessary steps to stop

Moscow from funding its war in Ukraine.

Rosneft is Russia's leading oil producer, accounting for

around 40% of the country's total output, and Lukoil is the

second-biggest, with the largest foreign exposure among its

domestic peers.

Neither Rosneft nor Lukoil immediately replied to a request

for comment.

The new sanctions target 51 ships, including 44 within the

so-called shadow fleet, as well as individuals and entities

across sectors including energy and defence.

The latest sanctions also include seven liquefied natural

gas tankers and the Chinese Beihai LNG terminal, which has been

importing cargoes from the sanctioned Russian Arctic LNG2

facility, Britain said.

Nayara, a Russian-owned refinery based in Mumbai, India, was

among the sanctioned companies.

The refiner, whose biggest shareholder is Rosneft and has

already been sanctioned by the European Union, is scrambling to

sustain operations.

Nayara, which has condemned the EU sanctions, did not

immediately respond to a Reuters request for comment.

DISRUPTION TO SHIPPING AND INSURANCE FOR RUSSIAN OIL

The measures taken by Britain will reduce ship and ship

insurance availability for Russia, as some volumes of Russian

oil were still being transported and insured on their routes to

Asia by British-based companies, traders familiar with Russian

oil sales said.

That meant more Russian oil trade would migrate towards the

shadow fleet, which uses non-Western insurance and services, the

traders said.

The number of ships in the shadow fleet already exceeds

1,500, according to estimates by Western experts, so there is no

shortage of ships to transport Russian oil.

However, several Chinese and Indian ports have in the past

refused to unload tankers from the shadow fleet, further

complicating Russian oil sales.

The shadow fleet has increasingly been the target of

sanctions from Britain, the U.S. and the EU since Russia's

invasion of Ukraine in February 2022.

It is a network of older tankers that officials say are used

to avoid sanctions on Russian oil.