Holes in EU Russia sanctions put attention back on Trump oil threat
The EU on Friday agreed on the 18th package of sanctions against Russia, which foreign policy chief Kaja Kallas said was one of the strongest to date.
The package lowers the price cap on Russian crude to $47.60 a barrel from $60, meaning shippers and insurance companies seeking to avoid sanctions can't handle purchases made above this level. The new cap, which takes effect on September 3, also includes a mechanism to ensure it is always 15% below average Russian crude prices.
A significant new addition is an import ban on refined oil products made from Russian crude. The ban, which would likely kick in next year, seeks to close a loophole created after the EU halted most imports of Russian crude and refined products in the wake of Moscow's invasion of Ukraine in February 2022. This action led to sharp rises in European imports of fuels, particularly diesel and aviation fuel, from China, India and Turkey.
The effectiveness of these initial measures was limited, however, as refiners in those three countries sharply increased imports of Russian feedstock due to the discounts created by the price cap.
Ultimately, the biggest loser from the new ban would likely be India, which accounted for 16% of Europe's imports of diesel and jet fuel last year, according to Kpler data. Russian crude also accounted for 38% of India's crude imports in 2024.
The new ban would exempt countries that are net exporters of crude, meaning the biggest beneficiaries of the new restriction will likely be Gulf producers with large refining operations such as Saudi Arabia, the United Arab Emirates and Kuwait that could pick up the slack from Indian refineries and export more fuel to Europe.
The Western sanctions on Russia's oil sector since 2022 have been carefully crafted to avoid creating a severe energy price shock while still aiming to constrain the revenue of Moscow, the world's third-largest oil exporter. They haven't been overly successful on the latter point.
Russia's crude oil and oil products export revenues reached $192 billion in 2024, significantly more than its defence budget of $110 billion that year. That compared with oil export revenue of $225 billion in 2019.
While Russia's oil exports declined slightly in June to 7.23 million barrels per day, revenue rose by $800 million from May to $13.6 billion thanks to higher global oil prices, according to International Energy Agency estimates.
This partly reflects the fact that Russia has found some workarounds, including developing a vast and opaque network of tankers, insurance and payment schemes that allow it to export its oil above the price cap.
The EU's latest package has also placed 105 additional tankers under sanctions for evading the original price cap, in addition to the 342 already sanctioned.
But Moscow will likely find ways to evade the worst effects of the new sanctions, perhaps by expanding the shadow fleet or further obscuring the origin of its oil through measures such as mid-ocean ship-to-ship transfers.
Moreover, India and China will likely continue buying discounted Russian crude to benefit their domestic markets, while re-routing fuel exports previously bound to the EU to new markets.
So even though, on paper, the new price cap could collectively reduce Russia's oil revenue, in reality, the new EU measures are unlikely to choke off Moscow's financial lifeblood.
One way to hit Moscow's finances would be for President Trump to implement the "secondary sanctions" he threatened last week, whereby countries that buy oil from Moscow will be hit with 100% tariffs unless the Kremlin reaches a deal to end the war in Ukraine within 50 days.
These secondary tariffs mean any country buying Russian oil would face severe restrictions on its ability to trade with the world's largest economy.
Would Trump actually take this drastic step?
Trump has expressed significant frustration with Russian President Vladimir Putin in recent weeks. And given that the multiple rounds of EU and U.S. sanctions on Russia have had a limited impact on Moscow's war chest, secondary sanctions could be one of the few effective tools left.
But in a global energy market, this effectiveness is precisely the problem.
If this drastic escalation of the West's economic war on Moscow were to severely curtail Russia's oil exports, this would also likely lead to a sharp increase in global oil prices and higher inflation – two things the U.S. president certainly does not want.
And that's likely why – despite all these developments – Moscow and oil traders both appear relatively unfazed for now.
Enjoying this column? Check out Reuters Open Interest (ROI), opens new tab, your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis. Markets are moving faster than ever. ROI, opens new tab can help you keep up. Follow ROI on LinkedIn, opens new tab and X., opens new tab
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


The Independent
7 minutes ago
- The Independent
Britain risks being ‘dumping ground' for forced labour goods, MPs warn
From 'Italian' tomato puree to solar panels, Britain risks becoming a ' dumping ground ' for goods made with Chinese forced labour, Parliament 's human rights watchdog has warned. The products are linked to forced labour in the Xinjiang Uyghur Autonomous Region, where thousands are made to work under threat and guard. These goods then enter UK supermarkets and energy firms. The new report, from parliament's Joint Committee on Human Rights (JCHR), found that the Modern Slavery Act 2015, the key framework governing forced labour, has no 'enforceable legislation' to actually stop such products entering the UK market. Unlike Westminster, key markets like the European Union and the United States have stronger laws to enforce bans on forced labour. This means that the goods are more likely to come to the UK. 'We are the weakest protected now in Europe,' former Conservative party leader and current co-chair of Inter-Parliamentary Alliance on China (IPAC) Sir Iain Duncan Smith told The Independent. 'People like Ed Miliband [Energy and Net Zero Secretary] are desperate for cheaper product and they don't want to have to have it slowed up or inaccessible.' 'Such is your desperation to get product in that you don't care what else you're going to attract.' The EU takes an enhanced due diligence approach, and the US takes a hardline approach where parts or goods made in Xinjiang are assumed to be made with forced labour unless proven otherwise. The cross-party group called on ministers to put in place the necessary due diligence and penalties to establish legal duty rather than the existing 'voluntary approach'. It said the government needed to determine who is responsible for preventing the import of tainted goods and what happens if they are confiscated. 'The UK's lack of equivalent legislation puts the UK at risk of becoming a dumping ground for goods that cannot be sold elsewhere,' the report said. But experts warn that even if ministers put these in place, due diligence is not a guarantee. 'The ability of UK companies to actually do due diligence and to police this is basically non-existent, which is why you're seeing this approach taken in the US,' Evan Fowler of IPAC, told The Independent. 'Not only has Beijing stopped publishing data that had previously been used by researchers to build a picture of what is happening, but the forced labour programme has likely been expanded,' Mr Fowler added, referencing a scheme which moves tens of thousands of people from Xinjiang to work in eastern factories. The report comes after a BBC investigation found 17 tomato products sold in UK supermarkets were likely made from tomatoes grown and picked in Xinjiang fields with forced labour. The supermarkets contested the findings. About a third of the world's tomatoes are grown in China and Xinjiang has the perfect climate for them. 'Cargo flights are permitted to bring goods directly from the capital of Xinjiang to the UK unhindered,' the JCHR said. Concerns have also been raised over base materials used to make solar panels imported into the UK - metallurgical grade silicon (MGS) and polysilicon. Xinjiang accounts for about 35 percent of the world's polysilicon and 32 percent of the world's MGS, according to a 2023 report on the Uyghur region and solar panels. In April the government passed an amendment to the Great British Energy Bill to ban forced labour in its supply chains - which drew similar criticism for its lack of due diligence or penalties. It was also criticised for not covering private solar farms, who are eligible for generous state subsidies through Contracts For Difference. 'The government seems to turn a blind eye to slave labour,' Sir Iain told The Independent. However, tracing products back to their true origin is often complicated by a lack of transparency from producers. Firms often split their supply between countries to claim tainted products go elsewhere or choose not to disclose where parts were sourced. Some constituents who ask where solar panels are sourced are falsely told they are made in Germany, Sir Iain told The Independent. 'Well, they're not made in Germany. It's just that the company producing them, they have a middle man. So that disguises where they came from. They never declare that they came from China.' China also increasingly frames due diligence as a national security threat, experts say. 'China is broadening the scope of what it considers to be national security sensitive when it comes to due diligence,' Andrew Yeh, Executive Director of the China Strategic Risks Institute, told The Independent. 'So anyone who is trying to trace which companies are involved or whether their supply chains are linked or not, are potentially crossing the Chinese government's red lines when it comes to how it thinks and defines national security.' Sir Keir Starmer's Government has sought to balance a revival of relations with Beijing in its pursuit of growth with matters of national security amid concerns about Chinese interference in Britain and human rights concerns. China has denied accusations it is subjecting the Uyghur minority to forced labour.


The Sun
8 minutes ago
- The Sun
UK-India trade deal to give huge boost to economy – but there's STILL bad news for Rachel Reeves
AN INDIAN trade deal signed today will boost Britain's economy by £4.8billion a year - but will come too late to bail out Rachel Reeves before the Budget. Sir Keir Starmer will host his counterpart Narendra Modi to ink the long-awaited agreement that tears down tariff barriers. 2 The post- Brexit pact will also exempt Indian temporary workers in the UK from paying National Insurance, and vice-versa with our citizens employed on the subcontinent. But ministers insist it will not increase net migration, which was one of the main fears when subsequent Tory PMs tried to get a deal done. Indian average tariffs on UK exports will be slashed from 15 to 3 per cent, while whisky producers will toast an immediate duty cut from 150 to 75 per cent. Trade Department analysis reckons the deal will add £4.5billion to UK GDP every year, boost wages by £2.2billion and rake in £1.8billion in tax receipts. However it is understood that the benefits of the deal - which needs to be ratified by both countries' Parliaments - will not be taken into account by the OBR in time for the Budget. Sir Keir said last night: 'Our landmark trade deal with India is a major win for Britian. 'It will create thousands of British jobs across the UK, unlock new opportunities for businesses and drive growth in every corner of the country, delivering on our Plan for Change.' In April 2022 then PM Boris Johnson pledged an Indian trade deal 'by Diwali' but negotiations were held up by demands for more visas for Indian migrants. Current Shadow Business Secretary Andrew Griffith last night hailed Brexit allowing Britain to strike out alone and make trade agreements. Moment Trump drops paperwork for US-UK trade deal after confirming it's 'done' alongside Starmer at G7 summit in Canada He said: 'This deal is only possible because of Brexit delivered by the Conservatives. 'Our slow learner of a Prime Minister must take note and stop capitulating to Brussels via his lopsided EU reset deal. 'Any trade deal that can successfully cut regulation which stops Britain's makers from creating new jobs and wealth will be a step in the right direction.' 2


The Guardian
8 minutes ago
- The Guardian
Labor lifts ban on US beef, saying new measures ‘effectively' manage biosecurity risks
Labor will lift restrictions on imports of US beef, easing tensions with the Trump administration as the federal government seeks relief from punishing US tariffs on steel and aluminium. The government confirmed on Thursday morning that the Department of Agriculture would allow the imports into Australia, saying the US now 'effectively' manages biosecurity risks in beef production. A ban on beef from cows raised and slaughtered in the US was lifted in 2019 but restrictions remained on beef from cattle raised in Canada and Mexico but slaughtered in the US. Changes to make protections more robust introduced in late 2024 and early 2025 allow for meat from those countries to be traced through supply chains to their source farm. The concession is expected to help pave the way for the prime minister, Anthony Albanese, to argue the case to Donald Trump that Australia should be given exemptions from the US's 50% tariff on steel and aluminium, and a looming 200% tariff planned for pharmaceuticals. Sign up: AU Breaking News email The US president specifically cited Australia's restrictions on beef imports when he announced his 'Liberation Day' tariff regime. Australia faces a 10% baseline tariff on all products exported to the US. During the federal election campaign, Albanese said Australia would not change or compromise any biosecurity rules, 'full stop, exclamation mark'. Despite the comments, a concession on beef had been expected from Australia. The agriculture, fisheries and forestry minister, Julie Collins, said the government wanted fair and open trade, which significantly benefited the cattle industry. 'The US beef imports review has undergone a rigorous science and risk-based assessment over the past decade,' she said. 'The Department of Agriculture, Fisheries and Forestry is satisfied the strengthened control measures put in place by the US effectively manage biosecurity risks. 'Australia stands for open and fair trade – our cattle industry has significantly benefited from this.' The new arrangements are due to come into place from 28 July, with Australian importers able to apply for permits to handle fresh beef products from the US, the largest buyer of Australian beef, ahead of China, in a $14bn market. The shadow finance minister, James Paterson, called for Albanese to explain the new arrangements. He said farmers needed reassurance there would be no risk to their businesses. Sign up to Breaking News Australia Get the most important news as it breaks after newsletter promotion 'The prime minister himself has said that we couldn't relax the restrictions on the importation of US beef because of serious biosecurity concerns,' Paterson told Sky News. 'So if the government has found some way of dealing with that issue, protecting our domestic agricultural industry from the introduction of foreign diseases and pests, then they should say so.' The Nationals frontbencher Bridget McKenzie warned against sacrificing farmers for 'deficiencies' in the government's handling of the US alliance. 'We need a biosecurity arrangement that's based on science,' she told Channel Nine. 'We would be concerned around, particularly the protocols on the slaughtering of beef out of Canada and Mexico, because we do not want to bring those diseases into our country and our farmers and our industry shouldn't be sacrificed because the PM can't get his act together on this relationship.' McKenzie said Nationals MPs 'will be very concerned if our $11bn beef export industry is sacrificed to actually make up for the deficiencies in the Anthony Albanese-United States diplomatic relationship.'