During Russia’s invasion of Ukraine in early 2022, American social media users enthusiastically shared posts calling for a boycott of Lukoil gas stations on the East Coast, on the grounds that they were owned by Russians. Like a very widely shared tweet abstract:
“#Boycott Russia. Lukoil gas belongs to Russia.
For its part, the popular left-leaning Facebook page “The Other 98%” wrote:
“Fill up somewhere else. Lukoil is a Russian multinational headquartered in Moscow. Their CEO, Vagit Alekperov, is a Russian oligarch worth an estimated $19.6 billion. Lukoil gas stations are all over Pennsylvania, NJ and NY.
These messages undoubtedly contained a significant amount of truth. Lukoil is indeed a large multinational oil and natural gas producer headquartered in Russia, with a US subsidiary that oversees a network of service stations, mainly in New Jersey, Pennsylvania and New York. Additionally, the company’s billionaire chairman, Vagit Alekperov, has ties to Russian President Vladimir Putin.
However, Lukoil does not generally operate these American gas stations itself. Rather, it operates on a franchise basis, meaning any successful boycott of Lukoil-branded gas stations would likely have negligible effect on the parent company or its billionaire chairman, but could prove financially devastating to dozens of people. American franchise owners and their hundreds of locals. employees. In short, Lukoil itself may be “Russian-owned,” but its US gas stations are US-operated and staffed locally. As such, we assign a rating of “Blend”.
Lukoil in the United States
Lukoil emerged from the dissolving Soviet Union in the early 1990s and entered the US market a decade later. According to the company’s website, Lukoil acquired US company Getty Oil in 2000, taking over and renaming its existing network of service stations.
The first Lukoil-branded gas station was opened in Manhattan’s Chelsea neighborhood in September 2003. Notably, the inauguration was attended by Putin himself – who was in the United States at the time for talks with then-President George W. Bush. In the photo below, Putin can be seen outside the Manhattan Lukoil, with Alekperov to his right, and US Senator Chuck Schumer, D-New York, to his left:
At the time, Lukoil would have taken over Getty’s existing network of 1,300 gas stations, but by 2022 the number of Lukoil-branded gas stations in the United States had fallen to around 230 – most, if not all, located in New Jersey, Pennsylvania and New York.
It is important to note that most, if not all, of these gas stations are operated under franchise. Franchising is a popular business model in the United States, with the best-known examples being fast food restaurants such as McDonald’s and convenience stores like 7-Eleven.
Basically, the franchisee (local entrepreneur) pays the franchisor (main business) certain fees: usually an initial franchise fee and regular royalties – usually a percentage reduction of their revenue from sales. In return, the franchisor gives the franchisee the right to operate a business using its well-known brand, for a set period of time, usually several years. The company can also provide advice or assistance with logistics, advertising, marketing, etc. The local entrepreneur is also contractually bound to operate the business in accordance with certain prescribed methods, customer service models, etc.
Lukoil — or more specifically, Lukoil North America, a Delaware-registered LLC with an address in Moorestown, New Jersey — offers three-year leases to franchisees in New Jersey, Pennsylvania and New York. In fact, as of March 2, the company’s website listed 13 different gas station locations in these states for rent:
A “lease offer” document, published on the company’s website, stipulated some of the terms and conditions of the franchise agreement:
The above-mentioned Bidder submits the rental offer below to rent the LUKOIL brand gas station indicated above and is ready to enter into an agreement with LNA for the rental thereof, subject to the conditions specified below. below. The lease term is generally three (3) years, but a longer term may be approved, at LNA’s discretion, provided sufficient site improvement or supply commitment is made to warrant a longer term. long.
In a March 2 Google post, Lukoil himself tried to protect his American franchisees from boycotts or other targeting, writing:
“LUKOIL gas stations in the United States are independently owned and operated by local business owners who are members of the communities they serve, and 100% of the gasoline and diesel fuel sold comes from refiners in American oil.”
Snopes asked Lukoil for details on the exact number of Lukoil-branded gas stations in the United States and how many, if not all, are franchised. We also requested specific details about the company’s revenue from franchise fees, royalties and/or rent paid by US franchisees, but did not receive a response in time for publication.
However, Lukoil’s financial results for 2021, which were released on March 2, gave an indication of the relatively small role of US gas station revenues in the company’s overall revenue, most of which comes from exploration and production of oil and gas in Russia.
In 2021, according to Lukoil, the company had total sales of 9.4 trillion rubles ($88 billion) and its earnings before interest, taxes, depreciation and amortization (EBITDA) was 1.4 trillion rubles ($13 billions of dollars).
Of that $13 billion, only 8.3% ($1 billion) was made up of “refining, marketing and distribution” outside of Russia. Although a more detailed breakdown is not available, it is reasonable to assume that revenues related specifically to American gas stations represented an even smaller fraction of this billion dollars, given that Lukoil refines, markets and distributes petroleum in many other countries around the world. .
It is also unclear whether, in the event of an effective widespread boycott of Lukoil-branded US gas stations, franchisees would still be obligated to continue paying fees and rent to Lukoil North America even if they had no no revenue from gasoline or convenience store sales.
Therefore, a successful boycott could result in the financial devastation – if not the ruin – of dozens of local entrepreneurs in the United States, as well as sudden unemployment for their hundreds of workers, in order to obtain what would only be a very small financial impact on the Russian parent company, or its bosses in Moscow.
Mass, Peter. “The Triumph of the Silent Tycoon.” The New York TimesAugust 1, 2004. NYTimes.comhttps://www.nytimes.com/2004/08/01/magazine/the-triumph-of-the-quiet-tycoon.html.
PRESS RELEASE MARCH 02, 2022 LUKOIL RELEASES 2021 IFRS FINANCIAL RESULTS PJSC LUKOIL RELEASES ITS AUDITED CONSOLIDATION TODAY. https://webcache.googleusercontent.com/search?q=cache%3AnFU75r0Wkh4J%3Ahttps%3A%2F%2Fwww.lukoil.com%2Fapi%2Fpresscenter%2Fexportpressrelease%3Fid%3D577486+&cd=7&hl=en&ct=clnk&gl=us. Accessed March 3, 2022.
“Putin helps open a gas station in Manhattan.” AP NEWS, https://apnews.com/article/521138dc3f0f6b986f0ba16ddea2f4fc. Accessed March 3, 2022.