EU’s 19th sanctions wave targets Russia’s energy lifelines: LNG ban, oil cap cut, and step-up in shadow fleet purge

Regulation & Policy

As the Russia-Ukraine conflict rages on with no peace agreement in sight, the European Union (EU) has proposed a new raft of sanctions against Russia to cripple the country’s ability to finance its military operations in Ukraine. The European Commission’s proposal for the 19th package of sanctions not only deepens the shadow fleet sweep with 180 new vessel listings, but also tightens the energy noose on the Kremlin with a liquefied natural gas (LNG) ban, marking a turning point in the EU’s attempt to wean itself off Russian fossil fuels.

Illustration: Sakhalin-1 facilities; Image copyright: Rosneft

Since the Ukraine crisis began, the European Union has designed and adopted various bundles of sanctions to force the Russian Federation to end the conflict, including measures to curtail its dependence on Russian energy supplies, which led to the rewriting of the global oil map.

The EU believes that its sanctions degrade Russia’s military and technological capability by cutting it off from most developed global markets, depriving the country of the revenues it needs to finance the war, and imposing ever higher costs on its economy. 

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Ursula von der Leyen, European Commission President, elaborated: “Unfortunately, over the past month, Russia has shown the full extent of its contempt for diplomacy and international law. It has launched some of the largest-scale drone and missile attacks against Ukraine since the beginning of the war, striking government buildings and civilian homes alike, hitting our EU office in Kyiv, the representation of our Union.

“The threats to our Union are also rising. In the last two weeks, Russian Shahed drones have violated our Union’s airspace in both Poland and Romania. These are not the actions of someone who wants peace. Again and again, President Putin has escalated. And in response, Europe is increasing its pressure. This is why today I am presenting our 19th package of sanctions.”

Amid the latest energy sanctions push, proposed in the 19th package, Brussels has escalated its hunt for Russia’s sanctions-evading ghost tankers with 118 vessel additions, bringing its clampdown on the country’s shadow fleet to over 560 ship entries.

The new sanctions, designed to strike Russia’s economy, target the Kremlin’s oil arteries, as two of its energy giants, Rosneft and Gazpromneft, face full transaction bans under the proposed measures.

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Von der Leyen highlighted: “Russia’s war economy is sustained by revenues from fossil fuels. We want to cut these revenues. So we are banning imports of Russian LNG into European markets. It is time to turn off the tap. We are prepared for this. We have been saving energy, diversifying supplies and investing in low-carbon sources of energy like never before. Today, these efforts pay off. Then, we have just lowered the crude oil price cap to 47.6 USD. To strengthen enforcement, we are now sanctioning 118 additional vessels from the shadow fleet.

“In total, more than 560 vessels are now listed under EU sanctions. Major energy trading companies Rosneft and Gazpromneft will now be on a full transaction ban. And other companies will also come under asset freeze. We are now going after those who fuel Russia’s war by purchasing oil in breach of the sanctions. We target refineries, oil traders, petrochemical companies in third countries, including China. In three years, Russia’s oil revenues in Europe have gone down by 90%. We are now turning that page for good.”

As the country’s oil revenues in Europe have dropped by 90% over the past three years, the EU is now turning up the heat on third countries over breaches by extending sanctions to refineries, oil traders, and petrochemical firms in these third countries, such as China.

The European Union’s 19th sanctions package proposes a ban on Russian LNG imports into EU markets, with the crude oil price cap lowered to $47.60 per barrel. The EU Member States have been urged to back the swift endorsement of these sanctions to give peace a real chance by forcing the Kremlin to engage in peace negotiations.

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“We add new direct export restrictions for items and technologies used on the battlefield. We also list 45 companies in Russia and third countries. These companies have been providing direct or indirect support to the Russian military industrial complex. In a war driven by innovation, cutting off Russia’s access to key technologies is crucial. Above all when it comes to drones,” emphasized Von der Leyen.

As outlined by the European Commission’s President, the new sanctions entail a transaction ban on additional banks in Russia and third countries to up the crackdown on circumvention.

In addition, the restrictive measures will hit crypto platforms and prohibit transactions in crypto currencies, list foreign banks connected to Russian alternative payment service systems, and restrict transactions with entities in special economic zones.

Von der Leyen underlined: “Our economic analysis is clear – our sanctions are severely affecting Russia’s economy. The interest rate is at 17%. Inflation is persistently high. Russian access to financing and revenues are consistently decreasing. And Russia’s overheated war economy is coming to its limits.

“Even more interesting is that when speaking directly with partners that speak to Russia, they say that among the first Russian requests is, sanctions relief. We know that our sanctions are an effective tool of economic pressure.”

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