The European Union is rolling out its 18th sanctions package against Russia, and this time, it’s aiming straight for the heart of Moscow’s energy sector. With a proposed ban on the Nord Stream pipelines and a tighter $45-per-barrel cap on Russian oil (down from $60), the EU is doubling down on its strategy to choke Russia’s war funding amid the ongoing conflict in Ukraine. But as the bloc pushes these ambitious measures, questions loom large: Can these sanctions deliver the intended blow, or are they just another drop in a leaky bucket? Let’s dive into the details, unpack the data, and explore the real-world implications for global energy markets.
Irina Slav has said, “Sanctions don’t work as Intended,” and this is a fantastic summation of sanctions. They don’t work and only increase energy costs to the EU for further deindustrialization and the financial collapse of countries like Germany. That being said, about the only thing that will get President Putin to the negotiation table is a business deal, and I have even written about the potential of the U.S. taking management of the Nord Stream pipeline project. I would not recommend that the United States get in the middle of the EU’s short-sighted energy policies or political decisions. We need to let the EU and NATO fail on their own, without bailing them out.
Additionally, as I have discussed, President Putin has shifted the Russian trading bloc to areas outside the EU and the UK, and is doing quite well. Germany is facing its third consecutive year of negative GDP growth, while Russia’s economy continues to expand.
The New Sanctions: What’s on the Table?
According to recent reports from the Financial Times and posts circulating on X, the EU’s latest sanctions package, set to be presented on June 10, 2025, includes two headline measures:
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Banning Nord Stream Infrastructure: The EU plans to prohibit the use of Russian energy infrastructure, explicitly targeting the Nord Stream 1 and Nord Stream 2 pipelines. This move aims to cement the bloc’s commitment to phasing out Russian gas imports by 2027, ensuring no revival of these controversial undersea pipelines linking Russia to Germany via the Baltic Sea.
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Lowering the Oil Price Cap: The existing G7-imposed price cap on Russian crude oil, set at $60 per barrel since December 2022, would be slashed to $45 per barrel. This reduction is designed to further squeeze Russia’s oil revenues by limiting the price at which Western companies can provide services like insurance and shipping for Russian oil exports.
These measures build on earlier sanctions targeting Russia’s shadow fleet of aging tankers and financial sector, reflecting the EU’s broader goal of pressuring Moscow to negotiate an end to the war in Ukraine. But to understand the potential impact, we need to zoom in on the Nord Stream pipelines and the oil cap’s effectiveness.
The Nord Stream Pipelines: What’s Left and Could They Return?
The Nord Stream pipelines have been a lightning rod for geopolitical tensions since their inception. Nord Stream 1, operational since 2012, and Nord Stream 2, completed in 2021 but never commissioned, were designed to deliver vast quantities of Russian natural gas to Europe. However, a series of explosions in September 2022 crippled the system, destroying three of the four pipeline strings (Nord Stream 1’s A and B lines and Nord Stream 2’s B line). Only one string of Nord Stream 2 (Pipeline A) remains intact but non-operational.
Capacity of the Remaining Pipeline
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Nord Stream 1 (pre-explosion): Each of its two lines had a capacity of 27.5 billion cubic meters per year (bcma), totaling 55 bcma.
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Nord Stream 2 (pre-explosion): Similarly, its two lines could deliver 55 bcma combined.
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Remaining Capacity: The sole intact Nord Stream 2 Pipeline A could theoretically carry up to 27.5 bcma if brought online. This is roughly half the capacity of either Nord Stream system and could supply about 8-10% of the EU’s total gas consumption in 2024 (which was approximately 330 bcma).
Could It Be Brought Back Online?
Reviving Nord Stream 2’s remaining pipeline is technically feasible but faces steep hurdles:
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Repairs and Maintenance: The pipeline has been idle since 2021, and even the intact string would require inspections and potential maintenance to ensure operational safety. The 2022 explosions highlighted vulnerabilities, and repairing or securing the system could cost hundreds of millions, with no clear timeline.
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Political Barriers: The EU’s proposed ban would legally prohibit any activity related to Nord Stream, dissuading investors and operators. Germany, once a key supporter, has firmly rejected reactivating the pipeline, with its Ministry for Economic Affairs dismissing the idea outright.
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Sanctions and Legal Issues: Existing U.S. and EU sanctions, combined with the new ban, would make it nearly impossible for Western companies to engage with Nord Stream without risking penalties. Russia’s Gazprom, the pipeline’s operator, is also entangled in breach-of-contract claims worth hundreds of millions, further complicating any revival.
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Market Dynamics: The EU has slashed its reliance on Russian gas from 40% of imports in 2021 to less than 8% in 2024, leaning heavily on Norwegian pipeline gas, U.S. LNG, and renewables. Even if Nord Stream 2 were reactivated, demand for Russian gas is uncertain, as countries like Hungary and Slovakia remain the primary buyers of Russian pipeline gas via other routes like TurkStream.
In short, while the remaining Nord Stream 2 pipeline could theoretically deliver 27.5 bcma, the combination of political will, legal restrictions, and market shifts makes its revival a long shot. The EU’s ban aims to slam the door shut on any lingering hopes of Russian gas returning via these routes.
The $45 Oil Price Cap: Can It Bite Harder?
The G7’s $60-per-barrel price cap, introduced in December 2022, was meant to curb Russia’s oil revenues while keeping global oil markets stable. By prohibiting Western companies from insuring or financing Russian oil sold above the cap, it forced Russia to sell at a discount or rely on its shadow fleet of unregulated tankers. The EU’s push to lower the cap to $45 per barrel is a bold escalation, but its effectiveness is under scrutiny.
How Has the $60 Cap Performed?
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Revenue Impact: The cap has had mixed results. Russia’s oil and gas revenues dropped by nearly 80% compared to pre-war levels, contributing to a skyrocketing budget deficit and high interest rates. However, Russia earned $189 billion from crude oil and refined petroleum products in 2024, up from $178 billion in 2023, thanks to circumvention via shadow fleets and sales to non-Western buyers like China and India.
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Circumvention: Russia’s shadow fleet, comprising old tankers with obscure ownership, has allowed Moscow to bypass the cap. Two-thirds of Russia’s oil exports in 2024 were delivered via these vessels, undermining the cap’s impact.
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Market Stability: The cap has kept Russian oil flowing to global markets, preventing a supply shock that could have spiked prices. However, fluctuations in Russia’s trade and evidence of sanctions evasion have prompted calls for a lower cap.
What Could a $45 Cap Achieve?
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Tighter Squeeze: A $45 cap would force Russia to sell oil at steeper discounts, potentially reducing revenues further. For context, Russia’s Urals crude often traded at $10-$20 below Brent in 2024, so a $45 cap could align closer to market discounts, limiting Moscow’s profit margins.
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Challenges: Russia’s shadow fleet and non-Western buyers could blunt the impact. Countries like India and China, which accounted for over 80% of Russia’s oil exports in 2024, are unlikely to enforce the cap, allowing Russia to sell above $45 to non-G7 markets.
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Risks: A lower cap could disrupt global oil supplies if Russia retaliates by cutting exports, although its reliance on oil revenue (approximately 40% of its federal budget) makes this scenario unlikely. Alternatively, stricter enforcement could strain Western shipping and insurance industries, raising costs for global trade.
- What people overlook is that the oil is being traded in Russian Rubles. This is direct cash into the Russian system, taking money away from the U.S. Dollar, Which Is used as the international currency standard. This is huge and not discussed often enough. President Putin will sell at $45 all day every day in his own currency. What will happen is that he will sell to India, and India will then ship to the EU at a higher price.
Will These Sanctions Work?
The EU’s latest sanctions are a clear signal of resolve, but their success hinges on enforcement and global cooperation. Here’s a breakdown of the potential outcomes:
Why They Might Work
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Nord Stream Ban: By legally blocking Nord Stream, the EU could deter any future attempts to revive Russian gas flows, reinforcing its pivot to alternative suppliers like Norway and the U.S. This aligns with the bloc’s 2027 goal to end Russian energy imports, reducing Moscow’s leverage.
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Oil Cap Pressure: A $45 cap, if enforced rigorously, could shrink Russia’s oil revenues, forcing tougher budget choices and weakening its war chest. Combined with sanctions on Russia’s shadow fleet, it could close loopholes that have diluted past measures.
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Political Signal: The sanctions package, backed by leaders like Ursula von der Leyen and Germany’s Friedrich Merz, sends a unified message to Moscow that the EU won’t back down, especially as Russia resists ceasefire talks in Ukraine.
Why They Might Falter
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Nord Stream’s Limited Relevance: With Nord Stream already offline and the EU’s gas imports from Russia down to 8%, the ban may be symbolic rather than transformative. Russia’s remaining gas exports flow via TurkStream and LNG, which face less immediate pressure.
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Oil Cap Evasion: Russia’s shadow fleet and non-G7 buyers could undermine the $45 cap, as seen with the $60 cap. Without global buy-in, Russia may continue selling oil at higher prices to Asia, offsetting losses.
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Internal EU Divisions: Hungary and Slovakia, reliant on Russian pipeline gas, have historically resisted energy sanctions. Unanimous approval is required for EU sanctions, and Hungarian PM Viktor Orban’s opposition could water down the package.
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Global Market Risks: A tighter oil cap could raise global energy prices if enforcement disrupts Russian supply. The EU’s hesitation to ban Russian LNG outright, citing concerns over alternative supplies, suggests caution that could limit the sanctions’ scope.
The Bigger Picture: Energy Markets and Geopolitics
For energy markets, the EU’s sanctions could tighten global oil supply if Russia’s exports are significantly curbed, potentially pushing Brent prices above $80 per barrel. However, Russia’s adaptability—via shadow fleets and Asian markets—suggests it won’t be easily starved of revenue. Gas markets, meanwhile, are less affected by the Nord Stream ban, as the EU has diversified its suppliers, with U.S. LNG exports to Europe hitting 70% of capacity in December 2024.
Geopolitically, the sanctions reflect a delicate balancing act. The EU is navigating U.S. policy shifts under President Donald Trump, who has floated easing sanctions on Nord Stream as part of peace talks—a move Germany and others reject. Ukrainian President Volodymyr Zelenskyy has urged stronger sanctions, warning that Russia’s “theatrical” peace talks could weaken Western resolve.
Conclusion: A High-Stakes Gamble
The EU’s proposed ban on Nord Stream and $45 oil price cap are bold steps to cripple Russia’s energy-driven war machine. The remaining Nord Stream 2 pipeline, with a potential 27.5 bcma capacity, is a shadow of its former self, and the EU’s ban aims to keep it that way. Meanwhile, the oil cap’s success depends on closing evasion loopholes and securing global cooperation—no small feat.
Will these sanctions work? History suggests Russia’s resilience and EU divisions could blunt their impact, but tighter enforcement and a unified front might just tip the scales. For now, energy markets and geopolitics hang in the balance, and the world is watching.
As I mentioned above, President Putin is trading in Rubles, and sanctions don’t work as intended. The Russian trading blocs have shifted, and EU leaders are “Mind over Matter.” “Putin does not mind, because they don’t matter.” – Stu Turley
The only sanctions that will hurt Moscow will be the United States imposing sanctions on the Indian and Chinese refineries, and that alone will likely cost President Trump the midterm elections, as I have discussed. It would be a devastating monetary and economic ripple effect felt around the world.
Stay tuned to Energy News Beat for the latest updates on this unfolding story. What do you think—can the EU finally outmaneuver Moscow, or is this just another round of sanctions chess? Drop your thoughts below!
Sources: Financial Times, Bloomberg, Reuters, POLITICO, Al Jazeera, OilPrice.com, Atlantic Council, X posts.
Note: Data and projections are based on available information as of June 10, 2025, and may evolve as the situation develops.
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