Swiss commodities trader Gunvor has withdrawn its offer to acquire the foreign assets of Russian energy company Lukoil after the U.S. Treasury Department labeled it a “Kremlin puppet” and made clear that Washington opposed the deal. The move effectively ends what would have been the largest transaction in Gunvor’s history and highlights Washington’s continued push to isolate Moscow and cut off its sources of funding for the war in Ukraine.

In a post on X, the U.S. Treasury said President Donald Trump “has been clear that the war must end immediately,” adding that as long as Vladimir Putin continues “his senseless killings,” Gunvor “will never be licensed to operate and profit.” The statement prompted a sharp response from Gunvor’s corporate affairs director, Seth Pietras, who called the U.S. position “completely false and misleading.” He said the company would seek to clarify the situation but was, in the meantime, withdrawing its offer for Lukoil’s international assets.

The planned acquisition, which included LUKOIL International GmbH, a holding company managing assets in Europe such as LUKOIL Neftochim Burgas, was intended to cover Lukoil’s operations outside Russia. Washington imposed sanctions on Lukoil last month to curb Russia’s oil revenues, after which the company confirmed that it had accepted Gunvor’s offer to buy its international holdings.

Lukoil’s assets slated for sale included refineries in Europe, stakes in oil fields across Kazakhstan, Uzbekistan, Iraq, and Mexico, and hundreds of gas stations worldwide. Analysts had warned even before the withdrawal that the deal would be difficult to finalize, as it exceeded Gunvor’s financial capacity and required approval from U.S. authorities, who hold the power to issue licenses or exemptions for transactions involving sanctioned entities.

Gunvor, one of the world’s largest independent energy traders, employs about 1,700 people globally and is known for its activities in oil, gas, and refined products. The company was founded in 2000 by Swedish businessman Torbjörn Törnqvist and Russian billionaire Gennady Timchenko, a close associate of Vladimir Putin. Timchenko’s ties to the Kremlin have long raised suspicions about Gunvor’s relationship with Moscow. After U.S. sanctions were imposed on Timchenko in 2014, Gunvor denied any financial connection to Putin, and Törnqvist bought out his Russian partner’s stake to sever links with Russia.

In recent statements, the company stressed that it has “actively distanced itself from Russia for more than a decade,” adhering to sanctions, selling Russian assets, and openly condemning the war in Ukraine. Törnqvist told Bloomberg that the Lukoil deal would have represented a “clean break” from Russian influence and ruled out any future resale of the assets to Lukoil, even if sanctions were lifted.

Lukoil surprised observers when it announced the Gunvor deal, as the Russian company’s 2023 equity was valued at 21 billion dollars, which is more than three times Gunvor’s capital. According to Bloomberg, the transaction would have transformed Gunvor into a hybrid producer with a daily output of around 440,000 barrels of oil and condensate, equivalent to the production of U.S.-based Diamondback Energy.

Market analysts are now watching to see how Gunvor’s withdrawal might affect oil supplies if Western regulators refuse to extend Lukoil’s existing licenses for international transactions. The collapse of the deal underscores the geopolitical and financial risks that continue to surround any Western involvement with Russian energy assets amid the ongoing war.