EU Works to Weave a Tighter Sanctions Net Around Russia. Will the U.S. Follow?

Peace talks between Russia and Ukraine imploded in a predictable failure, leading the European Union to propose an 18th sanctions package on June 10 in an effort to push Moscow back to the table.

The new restrictions would lower the price cap on Russian oil,expand the blacklist of financial institutions, and introduce secondary sanctions targeting entities enabling Russia to circumvent sanctions. Beyond tightening the screws on Russia, such measures would force countries on Russia’s periphery (and the companies doing business therein) to weigh whether being connected to Moscow is worth the cost. EU leaders will likely strive to adopt the sanctions by the June 26-27 European Summit.

The EU proposal is ambitious, which could prove fatal for the effort. EU sanctions packages require unanimous member approval, and, based on their past reluctance to take on Russia, Hungary and Slovakia will likely balk. However, ambitious measures could have powerful impacts.

Oil Remains a Cash Cow for Russia

Oil is a critical funding source for Russia’s war. Around a third of the Russian government’s income comes from oil exports. Ukraine’s President Volodymyr Zelensky commented on June 10, “Russia’s ability to continue the war is equal to its ability to sell [its] oil and bypass financial barriers.”

EU ships and insurers facilitate the export of much Russian oil, giving the union considerable leverage. In 2022, the G7, Australia, and the European Union introduced a $60 price cap on seaborne Russian oil intended to shrink profits on sales.

This month, the European Commission proposed lowering the price ceiling on Russian crude to $45 to align with a falling market. The cost of a barrel of oil had dropped 18 percent since 2022, although prices have since jumped in reaction to Israeli strikes on Iran.

Third Parties Soften the Blow of EU Sanctions

The EU’s proposed sanctions would take aim at the network of actors undermining current restrictions on Russia.

At the moment, enforcement difficulties allow Russia to sell 38 percent of its oil above the $60 cap. Moscow’s “shadow” fleet of tankers (often refurbished Western ships) frequently enables such sales, employing obfuscating tactics to mask the origins of the oil they carry. New sanctions would designate 77 additional vessels as Russian and prohibit the roundabout import of Russian oil after refinement.

The sanctions would also target those outside Russia facilitating prohibited trade. Countries, including Armenia and Kazakhstan, have served as pathways to Moscow for sanctioned products and may face consequences under the proposed measures. Even apparently benign smuggled goods could fuel Russia’s war effort. For example, in 2022, as trade between Armenia and Russia doubled, Armenian imports of EU washing machines surged, and European officials identified stripped washing machine components in Russia’s military apparatuses. New sanctions would “extend [a full transaction ban] to financial operators in third countries that finance trade to Russia in circumvention of sanctions.” Certain third-party companies “providing direct or indirect support to Russia’s military industrial complex” would face sanctions.

An Opportunity to Show Strength

The international community’s success in pressuring Russia depends on cohesion, making the position that the United States takes over the next weeks critical. Current oil price cap measures have weight because the G7, Australia, and the European Union combined uphold them. Similarly, only unified efforts to increase transparency in financial institutions and investigate sanctions evasion can prevent bad actors from slipping through the cracks.

If Congress passes — and the president signs — legislation that expands sanctions and targets third-party enablers, in conjunction with the new EU sanctions package, it would signal to Russia that it cannot wait out, ignore, or manipulate the West through feigned negotiations.

Angela Howard is a research analyst for the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD). For more analysis from Angela and CEFP, please subscribe HERE. Follow Angela on X @angela__howard. Follow FDD on X @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.