Zoryana Stepanenko / Radio Svoboda
On July 23, the European Union finally approved the 21st package of sanctions against Russia, the discussions around which extended over weeks. It includes more financial and energy restrictions against the aggressor state. The blacklists are updated with a record number of new entries since the beginning of the large-scale war: they are introduced against 48 individuals and 170 legal entities.
“The aim of today’s package is to further undermine the Russian economy and its war machine. It is a response to recent brutal Russian strikes deliberately aimed at civilian infrastructure [of Ukraine],” states the EU Council press release.
In particular, restrictions are imposed against Russian military-industrial complex companies, including those associated with long-range drones. Also, against entities in third countries that help Russia circumvent export restrictions.
This round of sanctions was intended as one of the most ambitious since the beginning of the full-scale invasion. However, some measures were softened or postponed in search of a compromise. But with a firm intention to return to them.
Oil Price Cap. How Much Will Russia Lose?
The most notable restriction of the new package is the freezing of the price cap on Russian oil at $44.7 per barrel for the coming year. It was introduced so that “the Russian war machine does not benefit from market disturbances,” explained the head of the European Commission Ursula von der Leyen.
The cap on Russian oil prices is considered remarkably effective in reducing Russia’s revenue, whose main source is energy exports. This restriction, in particular, prevents EU companies from transporting, insuring, financing, or providing other maritime services for the export of Russian oil to third countries if it is sold above the established limit.
An EU Commission official, not authorized to comment officially, says that the price cap helped reduce Russia’s oil revenues by a third from 2022 to the end of 2025.
However, the entire effect was threatened by the war with Iran, which unexpectedly and substantially enriched Russia. According to the EU Commission’s calculations, Moscow additionally earned $23 billion from the rise in oil prices just in April and May. This is not far from the amount the EU has allocated for Ukraine’s defense capabilities for all of 2026: up to 28.3 billion euros.
“This threatened to essentially nullify the effect of the entire strategy that we had built over the years… Our primary task in this very complex situation was to prevent these windfalls from nullifying everything we had achieved in the previous months,” emphasizes a high-ranking official to Radio Liberty under conditions of anonymity.
In the conditions of the closed Strait of Hormuz, there was a need to restore the effectiveness of the oil price cap, which was automatically reviewed twice a year. It was kept 15 percent lower than the average price of Russian Urals oil. Thus, the linkage to market fluctuations was clear.
By July 15, the EU was supposed to conduct another automatic review, which was eventually postponed to today – July 23. It would have “raised” the price cap on Russian oil to almost $60 per barrel, so the sense of urgency among member states, which had been unable to agree on new sanctions for weeks, was present today.
“You can imagine that in this way we would have given Russia significantly more opportunities to receive additional income,” noted an EU Commission official.
To avoid this, the EU Council agreed to suspend the automatic adjustment for 12 months – until July 2027. The European Commission calculated what this would cost Russia: if prices remain at their current level, this restriction will cost them 3.5 billion dollars. The amount is considered “quite substantial.” However, it significantly lags behind the earnings that the war in Iran enabled for Moscow.
Under EU sanctions are also three refineries in Russia, a major Belarusian refinery, and a company created to sell Belarusian oil products in Russia.
“Shadow Fleet”
The EU’s target remains the so-called Russian “shadow fleet” vessels, allowing Russia to transport oil circumventing price caps. For the first time, restrictions will extend to vessels providing services to the “shadow fleet,” such as refueling. This is related to Brussels’ observation that sometimes “third countries” assist it.
There were already 632 “shadow fleet” tankers on the European Union blacklist – with the introduction of the new package, this figure will increase to 673.
The sanctions effectively cut off “shadow fleet” vessels from EU ports and European maritime and financial services, complicating the transportation of Russian oil.
“We are now undoubtedly the leaders in the number of sanctioned ‘shadow fleet’ vessels,” said a European Commission official.
According to the official, the new rules also allow EU countries to confiscate cargo from “shadow fleet” vessels detained during maritime operations. Their introduction is linked to more frequent stops of such ships.
“The question arose: what to do with the cargo? As you can imagine, it can have significant value. Now it can simply be sold, and the money will go to the member state that detained the vessel,” the official explains.
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Liquefied Natural Gas
The subject of a prolonged discussion, which ultimately delayed the approval of the package by more than a week, was the restrictions against transporting Russian liquefied natural gas.
The EU is banning its import from 2027 and also wanted to prohibit the transportation or purchase of Russian LNG for third countries. Greece opposed this restriction, as it owns a significant trading fleet in the EU and transports Russian gas.
Athens insisted that this restriction would not change anything for Russia, but Greek shipowners would suffer.
“We found ourselves in a situation where it was clear that ships currently owned by EU operators, due to financial mechanisms related to their lease, would very quickly come under the control of Chinese operators. That is, we would have a ban, but it would not affect the flows of Russian LNG,” the European Commission agreed.
In the end, member states made concessions to Greece, partially satisfying its demands. An annual exemption from the ban on transportation and related purchases of Russian LNG for third countries was agreed upon. The EU Council will revisit this issue in a year and unanimously decide whether to maintain the exemption.
EU operators are allowed to work with Russian LNG only within contracts concluded before the full-scale war of Russia against Ukraine began. The quantities allowed to be transported are limited and cannot exceed what was transported by EU operators in 2025 – “the year when such transportation was at its lowest level,” explained an EU Commission official.
Finance
The European Commission considers financial sanctions against Russia effective, as they complicate trade for the aggressor state. Transactions are conducted through financial institutions. Therefore, the list of those subject to sanctions is expanding.
The Council freezes assets and prohibits providing funds to 94 banks and large financial institutions, as well as one influential representative of the Russian banking sector.
The ban on transactions extends to an additional 33 Russian credit and financial institutions. A European Commission official clarified that they will be disconnected from the international SWIFT financial messaging system, and “this is truly painful.”
“We are now focusing, in particular, on large regional banks or those banks that are taking over operations of other institutions already under prohibition. The situation is constantly changing, so it was very important to close these loopholes,” explained the official to journalists.
After the new round of restrictions, approximately half of all Russian banks will be under EU sanctions, according to the European Commission.
For aiding Russia in circumventing sanctions, third-country banks also fell under EU restrictions: one Mongolian, one Kyrgyz, and two subsidiaries of Russian banks in India – “Sberbank” and VTB.
Cryptocurrencies are becoming increasingly important, providing an alternative for transactions when banks are not processing them. The 21st package includes a ban on transactions with 14 platforms in Georgia, Panama, the UAE, the Marshall Islands, Kyrgyzstan, and Belarus.
For the first time, the EU is implementing the ability to completely ban cryptocurrency services from a specific third country.
“This new tool will allow the EU to prohibit any transactions between EU operators and any crypto providers used by Russia to circumvent sanctions,” states a press release from the EU Council.
Visa restrictions for Russian military postponed until October?
Presenting the proposal for the package in June, the head of the European Commission announced a ban on entry to the EU for Russian military personnel who fought against Ukraine.
The idea faced resistance from member states that traditionally receive the largest number of visa applications from Russians: Italy and France. They insisted that the restriction should be part of visa policy, not sanctions policy.
They also pointed to the difficulties of individually checking applicants to determine if they were participants in the so-called “SVO” – a term used by Russian authorities to designate the war against Ukraine.
The 21st sanctions package secured the principled agreement of member states on this restriction. However, the EU Council will separately determine when it will take effect.
The European Commission states the need to link the sanctions regime with the current Schengen visa system and develop a practical mechanism for its application.
“The system will remain the same, but there will be an additional basis for the relevant authorities to deny entry to the EU… There are still a few issues that I think we need to address regarding practical application: guiding principles, implementation, and what exact evidence will need to be provided to make this mechanism work in practice,” said an EU official on condition of anonymity.
The official expressed hope that the EU Council will be able to agree on the entry ban for Russian participants in the war against Ukraine, which was conceived as part of the 21st sanctions package, no later than October.
Ukraine’s Foreign Minister Andriy Sybiha welcomed the steps towards the official entry ban to the EU for Russian military personnel.
“Those who fight, enable, justify, or profit from Russian aggression should not enjoy the freedoms, security, and values they seek to destroy,” the top Ukrainian diplomat emphasized.
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Copyright © 2021 RFE/RL, Inc. Reprinted with permission from Radio Free Europe/Radio Liberty
