EU adopted on Friday a sixth package of sanctions against Russia in response to its unprovoked invasion of Ukraine. Sanctions were also imposed against Belarus for its involvement in Russia’s aggression.
Together with the previous five packages, the sanctions are designed to further increase economic pressure on Russia and undermine its ability to wage its war on Ukraine. They are described as unprecedented and massive by the European Commission but will not be applied immediately because of transition periods and temporary exemptions or exceptions for some member states.
From Ukraine’s point of view the sanctions may come to too late and they do not include all imports of fossil fuels from Russia. The first four sanction packages targeted mainly oligarchs and business elites linked to the Kremlin and consist of freezing their assets in the EU and bans on travels and investments. It would take a fifth ban, announced in beginning of April, to include a ban on imports of Russian coal.
When President Volodymyr Zelensky attended the Munich Security Conference in February, a few days before the outbreak of the war, he appealed for sanctions to be imposed as soon as possible. He also repeated previous appeals for new security guarantees to Ukraine and a diplomatic solution of the conflict with Russia.
The West was then seen as afraid that imposing sanctions might provoke Russia to invade Ukraine or close the door for diplomacy. The extent and type of sanctions might also depend on what action Russia takes – a full scale invasion, annexation of the breakaway regions or a kind of hybrid war to destabilize Ukraine and ruin its economy.
“We don’t need sanctions after the war has started, then it’s too late,” President Zelensky said in February. “If Russia would withdraw its 150,000 strong troops around our borders, there will be no need for sanctions.“ Instead Russia launched a full-scale invasion which by now already has lasted more than 100 days and wrought immense suffering and destruction on Ukraine.
The main new component in the package is a complete import ban on all Russian seaborne crude oil and petroleum products. This covers 90% of EU’s current oil imports from Russia. These sanctions entered into force as soon as they were announced in the Official Journal of the European Union (3 June) but in practice Russian oil imports is expected to be phased out in an orderly fashion.
In addition, the sixth package includes the removal of three Russian banks from SWIFT, including Russia's largest bank Sberbank, and one additional Belarussian bank. These banks are critical for the Russian financial system and Kremlin’s ability to further wage war.
The broadcasting activities of another three Russian State outlets – Rossiya RTR/RTR Planeta, Rossiya 24/Russia 24, and TV Centre International – have been suspended.
The list of advanced technology items banned from export to Russia has been expanded to include additional chemicals that could be used in the process of manufacture of chemical weapons, already controlled since 2013 for other destinations such as Syria.
Last but not the least, 65 more individuals and 18 entities have been listed and will be subject to restrictive measures. It focuses on the Russian Army and the defence industry, with officers involved in suspected war crimes, including in Bucha and the siege of Mariupol. The most high-ranking officer is a Colonel-General nicknamed “the Butcher of Mariupol”.
The new list also includes a number of proponents of disinformation and information manipulation, and some persons benefitting from their close relations with the Russian elites and the Kremlin such as family members of listed businessmen and Russian-appointed persons in occupied cities of Ukraine, notably Kherson.
Oil ban with exceptions
In theory, the impact of the oil ban on Russia is expected to be significant as around half of its total oil exports go to the EU. In 2021, the EU imported €71 billion worth of crude oil (€48 billion) and refined oil products such as diesel (€23 billion) from Russia. The sanctions distinguish between import of oil via tankers and pipelines.
Seaborne crude oil will be permitted for six months after the sanctions entered into force, while refined petroleum products will be permitted for eight months. Tanker imports account for about two thirds of EU’s oil imports from Russia. The figure increases to 90 % because Germany and Poland have agreed to stop importing oil via pipeline from Russia by the end of 2022.
Landlocked member states, e.g., Hungary, that have a particular pipeline dependency on Russia can benefit from a temporary exception and continue to receive crude oil delivered by pipeline, until the Council decides otherwise. The exception period for Czechia as regards refined petroleum products has been extended to end of 2023.
When a member state has made sufficient progress, a proposal should be submitted to the Council to end temporary exception. Countries benefitting from exceptions will not be able to resell such crude oil and petroleum products to other member states or third countries and should take all necessary measures to obtain alternative supplies as soon as possible.
Due to its specific geographical exposure, a special temporary derogation until the end of 2024 has been agreed for Bulgaria which will be able to continue to import crude oil and petroleum products via maritime transport. In addition, Croatia will be able to import Russian vacuum gas oil, which is needed for the functioning of its refinery, until the end of 2023.
To make it difficult for Russia to find other buyers, for example China, India and other countries, EU operators will be prohibited from insuring and financing the transport, in particular through maritime routes, of oil to third countries. Again, this ban will start to apply after a wind-down period of 6 months because of the importance of the shipping industry in Greece and Cyprus.
The risk of circumvention of the oil sanctions by blending Russian oil with non-Russian oil cannot be excluded but an EU official assured at a technical briefing on Friday that the Commission is working on technical guidance on how to apply the regulation. The application of EU sanctions is the primary responsibility of member states, which must implement them in their respective jurisdictions.
Natural gas ban not off the table
The EU imports 90% of its consumption of natural gas, with Russia providing more than 40% of the EU’s total gas consumption. Russia also accounts for 27% of oil imports and 46% of coal imports.
Russia’s revenues from exporting natural gas to EU member states are estimated to be about half of its revenues from exporting oil products but for the time being there is no proposal on imposing sanctions on them. The Commission considers the import ban on oil a significant step and a strong signal to Russia that EU is ready to take further measures, notably in the energy sector.
Nothing is off the table, according to the Commission. The EU is working to end the dependence on all Russian fossil fuels as soon as possible, including gas.
An EU official admitted that the oil sanctions alone will not stop the war from one day to the other but stressed that they will increase the pressure on Russia. The transition periods in the newly adopted oil sanctions have been calculated to strike a balance between maximising pressure on Russia and minimalizing the economic impact on the EU. In fact, it boils down to considering economic parameters such as import volumes and their effect on energy prices, and the need to decide by unanimity.
The crucial issue for Ukraine, which by now has endured 100 days of relentless fighting and atrocities which has killed thousands of civilians, destroyed its infrastructure and displaced millions of its inhabitants, is how fast the sanctions will dry out Russia of revenues and force it to cease the hostilities. The duration of the war is a parameter which was not possible to include in the Commission’s equation.
A Commission spokesperson told The Brussels Times that this is a political issue for the EU member states to consider. For the time being, there is no end in sight to the war. Russia is continuing its offensive in the Donbass region. Ukraine is still waiting for more heavy artillery and long-range missiles to expel the Russian army from its territory. The war risks dragging on for months with more losses and suffering and no victory for any side.
The Brussels Times