LNG and dark fleet emerge as salient points of EU’s new raft of sanctions against Russia

While the Russia-Ukraine crisis continues to get out of hand with no hints of a potential peace agreement in sight, the European Union (EU) has decided to hit Russia with more sanctions aimed at eating away at the country’s ability to finance its military operations in Ukraine. The EU’s 14th package of sanctions is expected to pave the way toward strengthening enforcement and anti-circumvention measures while targeting Russian liquefied natural gas (LNG) along with the shadow fleet, also known as the dark fleet, due to the rise in vessels trying to evade international restrictions.

After insisting on referring to its activities in Ukraine as a ‘special military operation’ for two long years, the Kremlin finally acknowledged that Russia was in a state of war a couple of months ago. Once the Ukraine crisis struck, the EU quickly took steps to wean itself off Russian oil and gas and diversify its supplies.

In a show of support for Ukraine and its people, the European Union designed and adopted various bundles of sanctions, including the 14^th one which has now been announced, in the hopes of bringing the Russian Federation to heel and ending the conflict. The actions taken to move away from Russia’s energy supplies led to the rewriting of the global oil map.

The EU believes that its sanctions degrade Russia’s military and technological capability, cut the country from the most developed global markets, deprive the Kremlin of the revenues it is financing the war with, and impose ever higher costs on its economy. These sanctions are seen as a tool in Europe’s toolbox designed to force Russia to sit down with Ukraine and iron out the details for a just and lasting peace, instead of simply agreeing to yet another frozen conflict.

While many have doubted the effectiveness of the imposed sanctions, proponents argue that their effects grow over time, eroding Russia’s industrial and tech base, as illustrated by Gazprom’s fall from grace, with the state-owned gas giant recording its first annual loss in over two decades. This loss was calculated at a staggering 629 billion roubles (around $7 billion) for 2023, as Europe turned its back on Russian oil and gas and sought to fulfill its energy needs elsewhere.  

Despite its zest to end what it often calls Vladimir Putin’s war machine, the EU is also determined to continue to ensure that its sanctions do not impact energy and agrifood exports from Russia to third countries. As guardian of the EU treaties, the European Commission monitors the enforcement of EU sanctions by EU Member States.

While the pile of sanctions has grown, Russia has not been idle, as the country is actively attempting to find a way to bypass these sanctions. As a result, the EU is set on redoubling its efforts to tackle circumvention and asking its neighbors for even closer cooperation. Given the shifting tides in geopolitics with the feared rise of far-right extremism, the EU is leaving no stone unturned to present a unified front and keep backing Ukraine.

The European Council’s adoption of a 14th package of sanctions against Russia could also be observed through this prism, as it aims to respond to the needs and findings on the ground and tackle enforcement issues to curb Russia’s sources of revenue and capacity to wage war.

Furthermore, the latest set of sanctions is bringing LNG into play for the first time as part of new energy-related measures taken against Russia, including targeting vessels that fuel the country’s coffers by transporting its supplies, goods, and services.

The EU has now moved to prohibit all future investments in, and exports to, LNG projects under construction in Russia such as terminals like Arctic LNG 2 or Murmansk LNG, and intends to also ban, after a transition period of nine months, the use of its ports for the transshipment of Russian LNG. On top of these, the package forbids the import of the country’s LNG into specific terminals, which are not connected to the EU gas pipeline network.

Another first for the EU’s sanctions package against Russia is the adoption of a measure targeting specific vessels contributing to the country’s warfare against Ukraine, which are subject to bans on port access and the provision of services.

This measure is also introduced to tackle tankers in Russia’s dark fleet, circumventing the EU and Price Cap Coalition’s caps. The first round of listings comes with 27 vessels, however, the EU plans to update the list as needed to address the ever-evolving involvement of those vessels in helping to fund Russia’s military actions in Ukraine.

The European Union did not stop here, as its package introduces new listings targeting individuals and entities responsible for actions undermining or threatening Ukraine’s territorial integrity, sovereignty, and independence, resulting in a total of 116 additional listings of 69 individuals and 47 entities, which are subject to travel bans and asset freezes, respectively.

Moreover, the new raft of measures is said to significantly strengthen the EU’s financial side of sanctions by introducing a ban for EU banks outside Russia to use the financial messaging system SPFS, the Russian equivalent of SWIFT, and allowing the Council to draw up a list of non-Russian third country banks connected to such system, so that, those banks can be banned from doing business with EU operators.

The 14^th set of sanctions also introduces a ban on transactions with banks and crypto assets providers not only in Russia but also in third countries, facilitating transactions supporting the country’s defense-industrial base. In line with this, one of the EU’s key objectives behind the sanctions is limiting Russian revenues and reinforcing export restrictions on industrial goods and advanced technology.

The latest package restricts the export of nine additional dual-use and advanced technology items, such as microwave and aerial amplifiers, flight data recorders, and all-terrain vehicles, extending the export bans on certain types of industrial products chemicals, plastics, vehicle parts, and machinery goods. Additionally, the export and transfer of manganese ore are now prohibited.

Featuring stricter restrictions for the export of dual-use and advanced technology items to 61 entities – Russia (28) and third countries (33) – which are directly or indirectly associated with the military complex, the package also widens the import ban to helium, which is perceived to be a significant contributor to Russia’s revenues.

In a crackdown on Russia’s avenues of evading sanctions, the EU has thrown into the mix several measures meant to boost private sector compliance, support enforcement by national competent authorities, and hamper sanctions circumvention, including by keeping in check the foreign subsidiaries of EU operators.

Last but not least, the 14^th bundle of sanctions finetunes the import ban on Russian diamonds, already agreed in the 12^th sanctions package, and postpones the ban on jewelry incorporating Russian diamonds processed in third countries other than Russia until the Council decides to activate it in the light of action taken within the G7 to pursue that measure.

While strengthening existing transport restrictions, especially the flight ban and road transport prohibition, the European Union has also taken measures to protect its democratic processes from the Kremlin’s interference by prohibiting political parties from receiving funding from the Russian state.