Trump's first sanctions, the 19th EU sanction package: The West increases force on Russia

On October 22, Donald Trump decided to impose sanctions on Rosniefté and Łukoil, the 2 largest oil companies in Russia. The restrictions besides included their subsidiaries, a full of 34 entities. On 23 October, the European Union besides expanded its restrictions on the FR by adopting the 19th package of sanctions, which primarily concerns energy sectors (including Rosniefti and Łukoil and the ban on Russian LNG imports from 2027) and banking (including Alfa-Bank) and exports to that country of further dual-use goods (see Annex more).

New Western sanctions are of large political importance due to Washington's incorporation into the economical force on Moscow. The introduction of restrictions on the largest Russian oil companies (corresponding to around 80% of home extraction) and the acceleration of the EU's opt-out of the EU's acquisition of LNG could importantly contribute to reducing Russia's export income and exacerbating its budgetary problems, especially as the price situation in the energy markets has been unfavourable to it since the beginning of this year.

Comment

• A real increase in the effectiveness of sanctions against Russia will depend on their enforcement. Trump's second administration has not yet introduced fresh restrictions on Moscow. As a result, this led to a crucial weakening of the restrictive effect, which was manifested, among another things, by a simplification in the discount on Russian oil compared to another natural materials brands, as well as a demonstration of the ignoring of restrictions by Chinese customers (not just oil). The crowning example of open breach of the sanctioning government is Chinese LNG import from Russian Arctic LNG 2 plant, which remains subject to American sharpening. Restoration of the sanctioning mechanisms of effectiveness will require US consequences in the form of active prosecution of sanctioning entities (tankers, banks, refineries), as was the case between 2023 and 2024. Otherwise, their effect will be short-lived and Russian exporters and their customers will rapidly adapt to restrictions. Taking into account Trump's declarations, expressing hope that the restrictions "will not be long", it cannot be excluded that their effects will offset the change in Washington's political calculations.
• Western sanctions in the short word will consequence in a sale of Russian oil and increase its export costs. In September, the discount on Brent's western brand was around $12 per barrel. As a consequence of the restriction, the prices of all natural material brands went up while Russian rates fell. This will lead to a simplification in the corporate margin and budget revenues. Restrictions force exporters to search fresh ways to carry out transactions, including by concealing the origin of oil, which will make costs and at the same time reduce the price attractiveness of Russian natural material. Moreover, sanctions against Rosniefté and Łukoil – if maintained for a long time – can further hit oil processing in Russia, making it hard for companies to get technology and spare parts for refineries.
• U.S. restrictions are challenging 3rd countries whose refineries process Russian oil or are Russian property. The sanctions force operators from India, China and Turkey in peculiar to cease imports of natural material from the FR, in peculiar on the basis of long-term contracts, under the threat of imposing secondary sanctions. While the likely script for the PRC is to isolate this transmission from the western clearing system, it is expected to revise the approach for India and Turkey, which sale fuel on Western markets. Any possible simplification in Russian oil imports from these countries would importantly reduce Russian export revenue. Sanctification is besides directed at EU countries. 2 of them, Slovakia and Hungary, are inactive importing natural material from Russia, and in others (Romania, Bulgaria and Germany) there are refineries belonging to the Łukoil and Rosniefti group. However, it cannot be ruled out that Washington will be ready to introduce temporary derogations for circumstantial entities, as has been the case in the past for the Serbian NIS refinery (see IP/10/73). US sanctions against Serbian NIS company).
• The systematic inclusion of third-country entities in the EU sanction lists shows a qualitative change in the EU's approach to restrictions. The imposition of direct restrictions on, among others, Chinese refineries, Asian banks or cryptocurrency exchanges indicates the expanding readiness of Brussels to actively prosecute those breaking restrictions, which signals a change in the paradigm of its action. The prosecution of companies outside Russia for violating the sanctioning government is increasingly akin to the US approach of imposing secondary sanctions. specified an increase in force should contribute to improving the effectiveness of EU sharpening.

ANNEX. 19. EU sanction package against Russia

• The European Union has decided to ban on imports of liquefied Russian gas (LNG) from 1 January 2027 for long-term contracts. At the same time, six months after the imposition of sanctions (i.e. 25 April 2026), short-term contracts will no longer be possible.
• Two oil companies, Rosniefté and Gazpromniefté, will be completely banned.
• Restrictions have touched another 117 units of shadow floats (total sanctions have already been imposed on 557 vessels), maritime registers offering them false flags, including Aruba or Curaçao, as well as traders from the United arabian Emirates, Hong Kong and the PRC, and 2 Chinese refineries.
• Total transaction ban another 5 Russian banks (including Alfa-Bank) and financial institutions from Belarus (four companies of daughters of Russian banks: Sbierbank, WEB, WTB and Alfa-Bank), Tajikistan, Kazakhstan, Kyrgyzstan, UAE or Hong Kong.
• She's been banned. support for Russian payment card (MIR) and the fast Payment strategy (SBP).
• Penalties tied to ruble tablecoin A7A5 (popular in cross-border settlements), as well as its Kyrgyz issuer and trading platforms (including Paraguay).
• Exports of dual-use goods to Russia were banned: Their list has been expanded to include further electronic components, chemicals, as well as geospatial information services or artificial intelligence. The restrictions besides included 45 entities, mostly from 3rd countries, including China, Thailand or India, which allowed Russia to access specified goods.
• Moreover, EU sanctions were imposed on 21 individuals, including Maksima Sokolov (director of the automotive company AwtoWAZ), and 11 people liable for the abduction and forced assimilation of Ukrainian children.
• EU limited the anticipation of free movement of Russian diplomats outside the country of accreditation. They are obliged to inform the competent authorities of the countries to which they are going of their intention. It is reserved that the associate States afraid may require them to get a travel licence on the basis of additional documents.