New Delhi, Oct 26 (PTI) ONGC Videsh Ltd has sought legal opinion after the United States imposed sanctions on a Russian oilfield in which a consortium of Indian companies holds a 49.9 per cent stake, sources said.

US President Donald Trump on October 22 announced new sanctions against two of Russia's largest oil companies, Rosneft and Lukoil, in a bid to pressure Moscow into ending its war with Ukraine.

As part of these, the US Department of the Treasury's Office of Foreign Assets Control (OFAC) designated a number of Russia-based Rosneft and Lukoil subsidiaries in which they, directly or indirectly, held a 50 per cent or more stake.

The list of subsidiaries thus blocked includes CJSC Vankorneft, in which OVL has a 26 per cent stake, and an Indian consortium comprising Oil India Ltd (OIL), Indian Oil Corporation (IOC) and Bharat PetroResources Ltd, which holds 23.9 per cent. The remaining 50.1 per cent is with Rosneft.

While a plain reading of the OFAC sanctions indicates that the restrictions do not apply to Indian companies, OVL is seeking legal opinions from domestic and international law firms to ensure it does not violate any sanctions, two sources with direct knowledge of the matter said.

The OFAC sanctions should not apply to Indian companies, as they do not hold a 50 per cent stake in Vankorneft, which has been designated as a sanctioned entity, they said.

Additionally, Indian firms do not receive any equity oil, a share of the oil and gas produced from the field in proportion to their equity stake.

Instead, they are entitled to dividends from the joint venture's earnings from oil and gas sales.

Also, Indian companies are not the operators of the fields, they said, adding the oil produced from the field is sold to traders who, in turn, sell it to refineries globally.

The Vankor field, spread over an area of 416.5 square kilometers, is located in the north-eastern part of the West Siberian Basin, around 142 km from Igarka in Russia. OVL in May 2016 paid Rosneft USD 1.284 billion to acquire a 15 per cent stake in CSJC Vankorneft, a company organized under the law of the Russian Federation, which is the owner of Vankor Field and the North Vankor license.

This 15 per cent stake gave OVL, the overseas investment arm of state-owned Oil and Natural Gas Corporation (ONGC), 4.11 million tonnes of oil and oil equivalent gas. It acquired an additional 11 per cent in October 2016 for USD 930 million, getting access to 3.2 million tonnes of oil equivalent.

That year, the consortium of OIL-IOC-BPRL bought 23.9 per cent in Vankorneft for USD 2.02 billion, giving them 6.56 million tonnes of oil equivalent. Vostok Oil LLC (an affiliate of Rosneft) holds 50.1 per cent in the fields.

Because of sanctions on Russia, Indian companies have not been able to repatriate dividends they earn from Vankorneft for the last three years. They have together accumulated some USD 1.4 billion in their Russian bank accounts.

Sources said OVL wants to be 100 per cent sure it is not violating any sanctions and has sought legal opinions on the stakes Indian firms hold in a designated (sanctioned) entity, Vankorneft.

Following the October 22 action, "all property and interests in property of the designated or blocked persons that are in the United States or in the possession or control of US persons are blocked and must be reported to OFAC," the US Treasury Department said on its website.

In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50 per cent or more by one or more blocked persons are also blocked." Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC's regulations generally prohibit all transactions by US persons or within (or transiting) the United States that involve any property or interests in property of blocked persons. Violations may result in the imposition of civil or criminal penalties on US and foreign persons.

For Indian companies, the risk of any violation of sanctions may lead to being blocked from raising overseas funds as well as restrictions on the use of US dollars in any foreign transaction. PTI ANZ DRR