The European Union (E.U.) Council on April 8 agreed to adopt a fifth package of sanctions against Russia in response to the recent reports of atrocities committed by Russian troops in Bucha and other areas of Ukraine.
The new sanctions include an entry ban on Russian flagged vessels and Russian-operated vessels from accessing E.U. ports, as well as “an anti-circumvention” measure against potash imports from Belarus. The exact nature of this measure is yet unclear, but it would seem to imply the banning of imports of potassium chloride into the E.U. from Belarus through Russia.
The new sanctions package has six elements, including an import ban on all forms of coal from Russia. According to a European Commission (E.C.) press statement on April 8, this affects one fourth of all Russian coal exports, amounting to a roughly €8 billion (approximately $8.7 billion at current exchange rates) loss of revenue per year for Russia.
The E.C. also indicated it and the European External Action Service (EEAS) are working on additional proposals for possible sanctions, including on oil imports from Russia. According to the statement, the E.C. is assessing some of the ideas presented by Member States in this regard, including taxes or specific payment channels such as an escrow account.
“Beyond sanctions, the E.U. has made it clear that reducing our dependence on energy imports from Russia is an urgent imperative,” the E.C. said in its statement. The E.C. said work has started to implement a strategy announced in its “REPower Communication” on March to reduce the E.C.’s dependence on Russian fossil fuels.
E.U. Member States are divided on whether to impose a ban on Russian oil and gas imports. The E.U. currently relies on Russian gas for around 40 percent of its needs. Some Member States, including Germany, Hungary, Austria, and Bulgaria, are more dependent on Russian gas than others.
Magnus Brunner, Austria’s Federal Minister for Finance, was cited by CNBC this week as saying Austria is against sanctions on oil and gas because the country “is very much dependent” on the Russian gas and “all sanctions which hit us more than the Russian’s wouldn’t be good for us.” Hungary is also reported to oppose sanctions against Russian fuel.
According to the European statistics office, Eurostat, Austria is estimated to have imported almost 59 percent of its natural gas from Russia in 2020, while Hungary, Bulgaria, the Czech Republic, and Latvia imported an even higher share of natural gas from Russia that year.
Lithuania has fully abandoned imports of Russian natural gas starting from April 1, according to a report by Russia’s Prime Business news agency, citing Lithuanian President Gitanas Nausėda on his Twitter page on April 2.
In a separate move, the European Parliament on April 7 passed a nonbinding motion demanding a total ban on all Russian energy imports into the E.U., according to an Agence France Presse report. MEPs voted 513 in favor, with 22 against and 19 abstentions, on an “immediate” ban on Russian coal, gas, and oil, as well as nuclear fuel, according to the report. Parliament Speaker Roberta Metsola called it a “very important moment” that sent the “strongest messages” to Ukraine on the degree of E.U. support.
The fifth round of sanctions against Russia has also extended import bans worth €5.5 billion on Russian products, including cement, rubber products, wood, spirits (including vodka), liquor, and high-end seafood (including caviar).
The E.C. statement announcing the new sanctions makes no mention of a reported proposal to place a cap on imports of Russian potash into the E.U., which was reported by Dow Jones earlier this week.
Last year, the E.U. imported 5.4 million mt of potash, of which 14.5 percent – or some 783,243 mt – was sourced from Russia, according to Trade Data Monitor. In March, the E.C. widened its sanctions on Belarusian potash, effectively banning imports into the E.U. of all grades of Belarusian potash. The move, part of wider new sanctions package against Belarus, was in response to the country’s role in supporting Russia’s invasion of Ukraine (GM March 4, p. 30).
The new sanctions include an entry ban on Russian-flagged vessels and Russian-operated vessels to E.U. ports. A full ban will also apply on Russian and Belarusian road transport operators working in the E.U. However, there is no mention of any ban on rail freight from Russia into the E.U.
“This ban will drastically limit the options for the Russian industry to obtain key goods,” the E.C. said. However, according to the statement, “certain exemptions will cover essentials, such as agricultural and food products, humanitarian aid, as well as energy, among others.” It is unclear if the “agricultural products” exemptions will include any Russian fertilizers.
An E.C. spokesperson contacted by Green Markets earlier this week said as per previous sanctions packages, he could not provide further details until this latest sanctions package is adopted by E.U. Member States and published in the E.U.’s Official Journal.
New financial measures in the sanctions package include a full transaction ban and asset freeze on four key Russian banks, among them VTB, the second largest Russian bank. “These four banks, which we now cut totally off from the markets, represent 23 percent of market share in the Russian banking sector,” the E.C said, adding that this will further weaken Russia’s financial system.
In addition, providing high-value crypto-asset services to Russia is now prohibited, as is providing advice on trusts to wealthy Russians, which the E.C. said would make it more difficult for Russians to store their wealth in the E.U.
Further targeted export bans are also being imposed against Russia, worth €10 billion, “in areas in which the country is vulnerable.” They include, for example, quantum computers and advanced semiconductors, and also sensitive machinery, transportation equipment, and chemicals. The export ban also includes specialist catalysts for use in the refining industry.
The E.C. said these measures will continue to degrade Russia’s technological base and industrial capacity. It also added jet fuel and fuel additives to the existing export ban list, noting that these products may be used by the Russian army.
A full prohibition is now imposed on the participation of Russian nationals and entities in procurement contracts in the E.U., although it said limited exceptions may be granted by competent authorities where there is no viable alternative.
The E.C. has also added an additional 217 individuals and 18 entities to its sanctions list. These include all 179 members of the so-called “governments” and “parliaments” of Ukraine’s Donetsk and Luhansk regions. In total, the E.U. has sanctioned 1,091 individuals and 80 entities as part of its Russian sanction measures since 2014.
“Russia is waging a cruel and ruthless war, not only against Ukraine’s brave troops, but also against its civilian population. It is important to sustain utmost pressure on Putin and the Russian government at this critical point,” said E.C. President Ursula von der Leyen in a statement
“The four packages of sanctions have hit hard and limited the Kremlin’s political and economic options,” she added. “We are seeing tangible results. But clearly, in view of events, we need to increase our pressure further. Today, we are proposing to take our sanctions a step further. We will make them broader and sharper, so that they cut even deeper in the Russian economy.”