Itchiness for Sanction

The new EU sanctions are not so much harmful to the Russian economy as they are destroying the perception of Europe as a reliable legal space

Well, the sanctions picture for the coming weeks is clear. The EU still accepted the 17th package of sanctions and immediately sat down to prepare the 18th. Britain has also imposed new sanctions (although the previous ones were signed just recently, precisely on May 9 – the date, of course, was not randomly chosen). Trump, on the other hand, has said he doesn’t want to break the negotiation process that has begun and will put sanctions on hold for now. Even though the sanctions package is already lying in Congress. In addition, the USA has so far blocked the reduction of the price cap. This sanction was imposed by the G7 countries and cannot be adopted without the USA (the price cap principle prohibits companies that recognize the G7 sanctions from providing sea transportation services for Russian oil at a shipment price in a Russian port above $60).

In fact, it very clearly sets the stage for the position of the West, which we liked to call “collective” until recently. And which, as we can see, has ceased to be so. Trump wants peace. And he will impose new sanctions if he deems Russia’s efforts in this direction insufficient. Europe, on the other hand, alas, wants war. Because an immediate cessation of hostilities without clear systemic agreements resolving the basic contradictions of the parties (and these are the EU’s main demands to Russia) is simply postponing a new war for the near future. Moreover, the concept of transforming the EU from a “blooming garden” into a “steel porcupine” implies that Europe itself may already be drawn into the next military conflict.

But the focus of this article will still turn to a different issue. How effective are the means of economic punishment for Russia? Does Europe have such new sanctions tools to force Moscow to accept Brussels’s political terms?

The new European sanctions are valid only in the European Union, and the so-called “shadow fleet” is perfectly capable of operating without European support…

The 17th package, which is presented by European politicians as nearly the most massive, clearly shows that the EU has problems with “economic weapons.” Yes, the new sanctions will create certain difficulties for Russian companies. As economists will tell you, they will increase their transaction costs. However, they will not create such difficulties for the Russian economy that would cause a change in Moscow’s political position. However, that is declared as the main objective of the sanctions’ actions. The energy sector (which is the main target of the sanctions) has learned to overcome this type of sanctions.

The EU has long emphasized the so-called shadow fleet as its main focus. The 17th package of EU sanctions against Russia includes another 189 ships. On the one hand, it is a lot. Last time, on February 24, 2025, the EU listed only 74 vessels on the sanctions list as part of the 16th package. And then the total number of ships subject to EU sanctions was 153. So, now the EU has more than doubled the number of sub-sanctioned vessels (specifically oil tankers, for the most part). On the other hand, this will not have any tangible effect on the volume of oil transportation.

The fact of the matter is that the EU sanctions prohibit sub-sanctioned vessels from entering EU ports and receiving a certain range of services (e.g. repair services) from European companies. The important point is that European sanctions apply only to the EU. However, the shadow fleet may well be able to function without the help of the Europeans. Which has been proven by the recent years’ practice. Especially since most of the ships on the EU sanctions lists were already on the blocking lists of either the UK or the US. Therefore, the loudest sanctions will miss the target.

The 10.3% (January-April 2025) decline in net oil-gas revenues paid to the Russian Federation budget was not related to sanctions, but to the general decline in world hydrocarbon prices.

US sanctions are tougher because they are cross-border (a separate question is on what basis is the US trying to extend its entitlement to the rest of the world). But even they don’t quite work in regard to the shadow fleet. Oil is reloaded from ship to ship, and the ships themselves change flags and registries. The story of oil delivery to India is very telling. In March 2025, several shipments of Russian oil were unloaded at the ports of New Mangalore and Paradip. The vessels making the last-mile deliveries were not placed on the US sanctions list. However, the initial leg of the journey took the cargoes to a floating storage facility in Murmansk by shuttle tankers, all of which were authorized by Washington. And the US Treasury Department has not penalized Indian companies in any way.

The EU sanctions lists also included 75 individuals and legal entities. Surgutneftegaz, a vertically integrated oil company, was among them for the first time. However, on January 10, 2025, Surgutneftegaz has already been included in the SDN-lists of the US Ministry of Finance. Another insurance company, VSK, has also fallen under the EU sanctions. But this won’t have any effect either.

The main initial mistake of the EU is that it was sure that without its market, no one in the world needs Russian oil and diesel. And without the help of European firms, Russian oil giants are not able to trade oil at all. I personally remember very well the alarmist predictions after the embargo was imposed on December 5, 2022: Russian oil exports were supposedly going to collapse by 50% in just another month. Yes, Russian companies will continue to give discounts to their customers. Yes, the transportation shoulder to India is longer than to Europe, and we earn less on such exports. But both Russian oil companies and the country were not left without oil revenues.

Actually, the statistics of the Ministry of Finance clearly speaks about this. In the first four months of 2025, net rent collections to the Russian budget from the oil and gas complex fell by 10.3% compared to the same period last year. This, by the way, was not caused by sanctions, but by the general fall in world prices. However, the 2025 result was still the third highest ever observed (after 2022 and 2024). And this despite the fact that on January 10, 2025, very massive sanctions were imposed by the USA (Biden’s “farewell gesture”).

By the way, they were also followed by forecasts that oil exports from Russia would collapse (and American sanctions are cross-border in nature, thus making them more dangerous than European ones). However, let’s turn to Bloomberg’s statistics on offshore oil shipments from Russia. Crude oil exports by sea over the past four weeks averaged 2.9 million bpd at the very end of 2024. And in mid-May, it was 3.4 million bpd. Thus, the US sanctions of January 10, 2025 could not reduce the volume of oil shipping from Russia.

It will be exactly the same with EU sanctions. And there’s another figure. In December 2024, before the latest US sanctions of January 10, 2025, the price differential between Dated Brent and Urals FOB at Primorsk was $13 per barrel. And in April 2025, it was $14.68 per barrel. Yes, there is an increase in discounts, but it is not critical. And it is caused particularly by American sanctions, not European sanctions. Moreover, in April, the discount decreased compared to February-March. This also suggests that Russian oil producers are quickly adapting to the “tanker” sanctions.