U.S. Sanctions on Russian Oil Giant Leave Northeast Gas Station Owners Scrambling

U.S. Sanctions on Russian Oil Giant Leave Northeast Gas Station Owners Scrambling

Family-run gas stations across New York and New Jersey are caught in the crossfire of geopolitical tensions, as U.S. sanctions targeting Russian energy company Lukoil threaten to upend franchise agreements and banking relationships for locally operated businesses that have no connection to Moscow beyond a brand name.

The disruption highlights an often-overlooked consequence of economic sanctions: the collateral damage to small business operators who find themselves suddenly associated with sanctioned entities, even when they're simply franchisees operating under a licensing agreement. For finance leaders, it's a reminder that geopolitical risk isn't just about supply chains and currency exposure—it can materialize in unexpected ways through brand relationships and banking compliance requirements.

Serguei Netessine, a Wharton professor of operations, information and decisions, explained the predicament in a February 20 podcast discussion. These gas station franchisees are independent operators who purchased the right to use the Lukoil brand, but the sanctions are creating problems that extend well beyond signage. Banking relationships are under strain as financial institutions reassess their exposure to anything connected to the sanctioned company name. Customer perceptions are shifting as drivers associate the Lukoil brand with Russian interests, regardless of who actually owns and operates the local station.

The situation is particularly acute in the Northeast, where Lukoil-branded stations have been a fixture for years. These aren't corporate-owned outlets—they're typically family businesses that invested capital in franchise agreements, equipment, and local operations. Now they're facing a choice between rebranding (an expensive proposition involving new signage, marketing, and potential loss of brand recognition) or weathering the reputational and operational challenges of maintaining the Lukoil name.

The banking angle is especially thorny. Financial institutions are under intense pressure to demonstrate compliance with sanctions regimes, and even indirect associations with sanctioned entities can trigger heightened scrutiny. For a small business operator, that can mean frozen accounts, terminated relationships, or simply the inability to process credit card transactions smoothly—all of which are existential threats to a cash-flow-dependent operation like a gas station.

What makes this particularly interesting from a finance operations perspective is the mismatch between legal reality and practical consequence. These franchisees likely have no financial ties to Lukoil's Russian operations beyond their franchise fees. They're not importing Russian oil. They're not sending money to Moscow. But in the world of sanctions compliance and brand perception, those distinctions matter less than the name on the sign.

The episode underscores a broader challenge for CFOs and finance teams: geopolitical risk assessment increasingly requires thinking beyond direct exposure. A company might have no operations in Russia, no Russian suppliers, and no Russian customers—but if it has a brand licensing agreement, a joint venture partner, or even a supplier's supplier with Russian connections, sanctions can still create operational headaches.

For the gas station operators themselves, the path forward is unclear. Rebranding requires capital at a time when margins are already thin. Maintaining the Lukoil name means fighting an uphill battle with both banks and customers. And unlike large corporations with government affairs teams and legal departments, these small operators have limited resources to navigate the complexities of sanctions compliance and brand rehabilitation.

The situation also raises questions about the design of sanctions regimes. The goal is to pressure the Russian government and its connected entities, but the immediate impact often falls on parties far removed from the policy decisions the sanctions are meant to influence. Whether that's an acceptable cost of economic statecraft is a question for policymakers, but for the franchisees caught in the middle, it's an urgent business problem with no easy answers.