The EU executive has promised to cap the price of Russian oil and impose further curbs on hi-tech trade, as part of the latest round of sanctions to “make the Kremlin pay” for the escalation of the war against Ukraine.
The president of the European Commission, Ursula von der Leyen, said Russia had ramped up the invasion to “a new level”, listing the sham referendums in Russian-occupied territory, the partial mobilisation order and Vladimir Putin’s threat to use nuclear weapons. “We are determined to make the Kremlin pay for this further escalation,” she said.
She promised the EU would introduce a price cap on Russian oil to “help reduce Russian revenues and keep the global market stable”. The European Commission also wants to impose further restrictions on hi-tech goods the EU can sell to Russia such as certain chemicals and aviation components to further weaken the Kremlin’s ability to wage war.
Von der Leyen said anyone who helped Russia evade sanctions faced being added to the EU’s list of of restrictive measures. “This will have a major deterring effect,” she said.
Shortly before she spoke, Oleg Ustenko, an economic adviser to Ukraine’s president, Volodymyr Zelenskiy, urged the EU to introduce a price cap on Russian oil “as soon as possible”. Ustenko said Russia was earning hundreds of millions a day from selling oil, which was being channelled to fund the war against Ukraine.
“Of course the main goal is to cut off Putin’s regime from all possible sources of financing. No doubt that the main source of financing for them right now is everything related to fossil fuels,” he added.
EU nations have spent €98.5bn (£88bn) on Russian oil, gas and coal since the invasion was launched on 24 February, of which more the €50bn has been on oil, according to the Beyond Coal tracker.
In Ukraine’s view the EU’s package of sanctions should “be already done”, Ustenko told reporters, urging the European Commission to table the proposals as soon as possible.
The ambassadors of the EU’s 27 member states were briefed by Commission officials on the plans on Wednesday afternoon. While the plans predate the fake referendums organised by Russia in occupied Ukraine, the EU has responded by adding more people to its sanctions list. Officials who work for proxy Russian authorities in Donetsk, Luhansk, Kherson and Zaporizhzhia, as well as those who have facilitated the sham polls, will face EU visa bans and asset freezes.
The EU proposal for an oil price cap was widely expected after a pledge by the G7 earlier this month. Under plans agreed by the US, Canada, Japan, the UK, France, Germany and Italy, firms shipping and insuring Russian oil will only be able to operate if they adhere to a price below a yet-to-be-determined level.
The plan takes advantage of the fact that most Russian oil is shipped and insured by companies operating in the EU and the UK. The price cap, pushed by the US Treasury secretary, Janet Yellen, and Italy’s outgoing prime minister, Mario Draghi, is seen as a necessary follow-up to the EU’s decision to ban 90% of Russian oil imports at the end of the year.
The EU ban on most Russian crude oil purchases comes into force on 5 December, with an embargo on refined products such as diesel following on 5 February. The US was concerned that without action to control oil prices, costs for consumers and businesses would soar afterwards.
Analysts have said the oil-price plan is technically complex and uncertain to work, as China, India and Turkey, the three largest importers of Russian oil outside the EU, do not support the idea.
Ustenko, however, insisted “pragmatic” countries such as India and China would come on board, saying: “Who on the market is willing to pay an extra premium for Putin’s oil? Even if they are not signing the agreement they are going to follow up the rules.”
The European Commission also has to convince EU member states with large shipping industries, such as Greece, Cyprus and Malta. But a more difficult hurdle for reaching unanimity is likely to be Hungary, a large consumer of Russian energy that has blamed western sanctions for causing a “global economic war”.
“This [sanctions] weapon backfired and Europeans are paying a sanctions surcharge for oil, gas and electricity,” the Hungarian prime minister, Viktor Orbán, told his parliament on Monday. The Orbán government also plans to organise a referendum on public support for sanctions, a well-established tool it uses to raise the temperature in its disputes with the EU.
Ustenko said the European Commission should consider withholding EU funds from Hungary if the country failed to support sanctions. The legal options for such a step are doubtful, although Brussels has threatened to suspend €7.5bn of EU funds for Budapest over separate concerns about corruption.
Another element of the sanctions plan includes a ban on EU nationals sitting on the boards of Russian companies, a move that would affect the former German chancellor Gerhard Schrӧder, who has been excoriated for refusing to give up his friendship with Putin. Schrӧder stood down from Russian oil major Rosneft in May, but retains a role at pipeline company Nord Stream.
“Offering well-remunerated posts on the governing boards of Russian state-owned enterprises … has long been an important element of the Russian government’s efforts to gain undue political influence on EU member states,” states the original proposal drafted by Germany’s government. “We should put an end to these attempts of strategic corruption.”
Diplomats said the proposals were not target explicitly at Schrӧder. After Putin launched the invasion off Ukraine, the former French prime minister and presidential candidate François Fillon stood down from positions on the boards of two Russian companies, while the former Austrian chancellor Christian Kern quit the board of Russia’s state-owned railways.
