Russia and the EU in a sanctions - Created by Grok on X
In a bold yet unilateral move, the European Union has rolled out its 18th sanctions package against Russia and Belarus, slashing the price cap on Russian crude oil from $60 to $47.60 per barrel. This adjustment, representing a 15% reduction below the average market price, aims to further squeeze Moscow’s energy revenues amid the ongoing conflict in Ukraine. However, as the EU acts independently without full G7 alignment, questions arise about the real impact of these measures, especially given Russia’s resilient economy and the bloc’s own economic struggles.
Details of the New Sanctions Package
Approved in July 2025, the latest EU sanctions introduce several key changes to tighten the noose on Russian oil exports. The price cap reduction to $47.60 is paired with a “dynamic review” mechanism, allowing for regular adjustments to keep the cap effective in line with fluctuating global oil prices.
This unilateral decision by the EU diverges from the G7’s original framework, with the U.S. notably not joining the lower cap, raising concerns about enforcement consistency.
Beyond the price cap, the package targets Russia’s “shadow fleet”—a network of aging tankers used to evade sanctions—by sanctioning an additional 100 vessels, bringing the total to 444. These tankers now face EU port access bans and restrictions on maritime services like insurance and brokering.
The sanctions also impose a full transaction ban on the Nord Stream 1 and 2 pipelines, prohibiting any completion, maintenance, or operation. In a bid to close loopholes, the EU has banned imports of refined petroleum products derived from Russian crude from third countries, with exemptions only for Canada, Norway, Switzerland, the UK, and the U.S.
Asset freezes and travel bans extend to entities involved in Russian oil trade, including traders, shadow fleet managers, and even a major Indian refinery partially owned by Rosneft.
Slovakia, which initially vetoed the package over energy security fears, relented after securing guarantees, including a “crisis mechanism” for gas shortages and EU funds for compensation by January 1, 2028.
EU High Representative Kaja Kallas emphasized that these steps are designed to “increase costs for Russia,” making continued aggression unsustainable.
Yet, with Russia already trading much of its oil above the cap through non-Western channels, the effectiveness remains uncertain.
Adding complexity, potential U.S. secondary sanctions under President Trump could disrupt global flows further. India, a key buyer of discounted Russian crude (accounting for 35-40% of its imports), might face tariffs for exceeding the cap, potentially reducing Russian revenues by $10-20 billion while spiking global prices to $90-100 per barrel.
This could indirectly benefit the EU by tightening supplies but also risk higher fuel costs and inflation in Europe, where Indian-refined Russian products have filled gaps since the 2023 ban on direct imports.
A Brief History of Sanctions on Russian Oil
Western sanctions on Russian energy began intensifying after the 2022 invasion of Ukraine. In September 2022, G7 finance ministers committed to a price cap to limit Russia’s war funding while stabilizing global markets.
By December 5, 2022, the EU and UK imposed a full ban on seaborne imports of Russian crude, coupled with the G7’s $60 per barrel price cap on exports to third countries.
This cap prohibited Western services like insurance and shipping for oil sold above the threshold.
In February 2023, the regime expanded to refined petroleum products, setting caps at $100 for premium products (like diesel) and $45 for discounted ones (like fuel oil).
The EU’s oil embargo, announced in June 2022, came into full effect alongside these measures.
Over time, enforcement has targeted shadow fleets and evasion tactics, but Russia has adapted by rerouting exports to Asia and using non-Western tankers.
The latest 2025 package marks a reboot, with the EU lowering the cap independently to address perceived ineffectiveness.
Despite initial successes in widening the discount on Russian Urals crude, the cap’s impact has waned as Moscow finds workarounds.
Contrary to early predictions of collapse, Russia’s economy has shown remarkable resilience over the past two years, potentially extending into a third. In 2023, GDP grew by 4.1%, fueled by military spending, high oil prices, and redirected exports to friendly nations like India and China.
This momentum continued into 2024, with another 4.1% expansion, driven by wartime stimulus and non-oil revenues.
Projections for 2025 indicate a slowdown to around 1.4-1.5%, as overheating risks emerge from inflation and labor shortages.
Still, this outperforms initial post-invasion forecasts, with the World Bank and IMF noting Russia’s adaptation through parallel imports and fiscal boosts.
Oil revenues, despite sanctions, remain robust at over 10 million barrels per day, bolstering a war economy that’s defied Western pressure.
The EU’s Faltering Economies: A Stark Contrast
While Russia booms, the EU grapples with sluggish growth and persistent challenges. The bloc’s GDP expanded by just 1.1% in 2024, with the euro area at 0.9%, hampered by high energy costs, inflation, and geopolitical tensions.
Forecasts for 2025 mirror this modesty: 1.1% for the EU and 0.9-1.3% for the euro area, with risks from trade wars and energy insecurity.
Germany and France, the EU’s powerhouses, face stagnation, with overall growth projected to dip amid global uncertainty.
The shift away from cheap Russian gas has inflated energy bills, contributing to deindustrialization and weaker consumer spending.
In Q1 2025, euro area growth was revised to 0.6% quarterly, but annual figures remain anemic.
Year
Russia GDP Growth
EU GDP Growth
Euro Area GDP Growth
2023
4.1%
~1.0%
~0.8%
2024
4.1%
1.1%
0.9%
2025 (proj.)
1.4-1.5%
1.1%
0.9-1.3%
This table highlights the irony: Russia’s economy has outpaced the EU’s for two years running, with 2025 potentially marking a third where Moscow’s growth, though slowing, still holds steady amid sanctions.
Will the New Cap Change Anything?
The EU’s latest sanctions underscore a commitment to pressure Russia, but history suggests limited success. Russia’s economy continues to adapt, potentially growing for a third straight year while the EU’s falters under self-imposed energy constraints. As potential U.S. actions loom, the global oil market could face more volatility—but it’s unclear if this will break Moscow’s resolve or merely exacerbate Europe’s economic woes.
For now, the lowered cap may be more symbolic than transformative. Irina Slav, an outstanding energy writer, has always said, “Sanctions don’t work as intended.” In this case, President Putin has had an expanding economy while the EU is on the edge of a financial cliff. Stu Turley has said, “President Putin’s attitude about the EU is simply mind over matter, as the EU does not matter, President Putin does not mind.”
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