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Info Service on WTO and Trade Issues (Oct25/16) Geneva, 24 Oct (D. Ravi Kanth) — The European Union on 23 October joined the United States in imposing a new regime of sanctions on the Russian oil companies Lukoil and Rosneft, along with their subsidiaries, in an apparent move aimed at ratcheting up pressure on Moscow to agree to an immediate ceasefire in Ukraine, analysts said. In a seemingly furious response a day after the announcement of the sanctions, Russian President Vladimir Putin described the sanctions as “an unfriendly act toward Russia, and it doesn’t strengthen relations between Russia and the United States that only began to get restored”. The EU’s adoption of the 19th package of sanctions against Russia includes its first-ever measures targeting Russian liquified natural gas (LNG). According to media reports, the EU has agreed to a phased ban on Russian LNG imports, with the goal of stopping all trade in Russian shipped gas by 1 January 2027. The package, which also targets the “shadow fleet” of vessels that Russia uses to evade an oil price cap, was formally approved as EU leaders gathered in Brussels to discuss support for Ukraine. Announcing the adoption of the measures on the social media platform X, European Commission President Ursula von der Leyen said: “For the first time we are hitting Russia’s gas sector – the heart of its war economy. We will not relent until the people of Ukraine have a just and lasting peace.” A report in the Guardian noted that Europe bought a record amount of Russian LNG in 2024 after pipeline gas supplies plummeted – a trade that benefited Russia and undermined the EU’s support for Ukraine. The EU has added 117 “shadow fleet” vessels to its sanctions list, bringing the total to 557 vessels suspected of illegal shipments of Russian oil. The 27-member bloc had also scheduled a leaders’ meeting on 23 October to finalize the sanctions and address financing for Ukraine’s immediate war needs. More than a hundred billion euros of Russian assets remain frozen in EU banks and financial institutions since 2022, when Russia launched its “special military operation” against Ukraine. A plan circulated by the European Commission (EC), the EU’s executive arm, suggests that leaders will focus on using these frozen funds to aid Ukraine, with a final decision on implementation left to the EC. “We will take the political decision to ensure the financial needs of Ukraine for 2026 and 2027, including for acquisition of military equipment,” said Antonio Costa, the president of the European Council, on the sidelines of the meeting. The Council sets the political direction for the European Union. The EU leaders’ decision appears to be a novel move, creating a “reparations loan” that harks back to actions taken by the Allies, particularly England and France, against Germany after the First World War. The EU’s action plan follows similar steps taken by the US a day earlier. US SANCTIONS On 22 October, US President Donald Trump gave the proverbial green light to immediate sanctions on Russia, a plan prepared by US Treasury Secretary Scott Bessent. The US sanctions prohibit foreign countries or companies from conducting business with the designated Russian oil companies by threatening to cut them off from much of the international financial system. The Trump administration justified the decision on grounds that “it is time” to act against the Russian oil companies. President Trump said, “I just felt it was time. We waited a long time.” He later posted the sanctions list on his social media website, Truth Social, calling on Moscow to agree to an “immediate cease-fire.” Separately, US Treasury Secretary Bessent said, “Now is the time to stop the killing and for an immediate cease-fire”. He warned that the “Treasury is prepared to take further action if necessary to support President Trump’s effort to end yet another war. We encourage our allies to join us in and adhere to these sanctions.” The sanctions come as negotiations to end the war in Ukraine have stalled, with President Trump putting off a planned second summit with Russian President Vladimir Putin in Budapest. The imposition of sanctions is seen as a signal that President Trump’s patience with President Putin is wearing thin as he seeks ways to pressure Russia into a peace deal. Meanwhile, Ukrainian President Volodymyr Zelensky welcomed the Trump administration’s decision to impose sanctions on Russia. “We waited for this,” he told reporters. “This is very important.” Olga Stefanishyna, Ukraine’s ambassador to the US, stated: “For the first time during the tenure of the 47th President of the United States, Washington has decided to impose full blocking sanctions against Russian energy companies. This step follows numerous efforts to give Russia an opportunity to engage in genuine negotiations to end the war.” She added, “This decision fully aligns with Ukraine’s consistent position that peace can only be achieved through strength and by exerting maximum pressure on the aggressor using all available international instruments.” Eddie Fishman, a former senior State Department sanctions official, noted the escalation: “Before today, Rosneft and Lukoil were cut off from US capital markets. Today, they are fully cut off from the dollar – all transactions of any kind.” In a press release, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) stated it was imposing further sanctions “as a result of Russia’s lack of serious commitment to a peace process to end the war in Ukraine.” The Treasury Department claimed that the “actions increase pressure on Russia’s energy sector and degrade the Kremlin’s ability to raise revenue for its war machine and support its weakened economy,” while suggesting that the US will continue to advocate for a peaceful resolution to the war. The US action targets Russia’s two largest oil companies, which are now fully designated: * Rosneft: A vertically integrated energy company specializing in the exploration, extraction, production, refining, transport, and sale of petroleum, natural gas, and petroleum products. * Lukoil: Engages in the exploration, production, refining, marketing, and distribution of oil and gas in Russia and internationally. Additionally, OFAC designated a number of Russia-based Lukoil and Rosneft subsidiaries, including: * Lukoil Subsidiaries: Limited Liability Company Lukoil Perm; Lukoil Aik A Limited Liability Company; Lukoil Kaliningradmorneft; Lukoil West Siberia Limited; Russian Innovation Fuel and Energy Company; and Uraloil. * Rosneft Subsidiaries: Aktsionernoe Obshchestvo Kuibyshevskii Neftepererabatyvayushchii Zavod; AO Sibneftegaz; Bashneft Dobycha; CJSC Vankorneft; Joint Stock Company East Siberian Oil and Gas Company; Joint Stock Company Grozneftegaz; Joint Stock Company Rospan International; Joint Stock Company Ryazan Oil Refinery Company; Joint Stock Company Samaraneftegaz; Kharampurneftegaz; Limited Liability Company Bashneft Polus; Limited Liability Company Kynsko-Chaselskoe Neftegaz; Limited Liability Company RN Purneftegaz; Limited Liability Company RN Tuapse Oil Refinery; Limited Liability Company RN- Krasnodarneftegaz; OJSC Achinsk Refinery; OJSC Novokuybyshevsk Refinery; OJSC Orenburgneft; OJSC Samotlorneftegaz; OJSC Syzran Refinery; PJSC Verkhnechonskneftegaz; Public Joint Stock Company Saratov Oil Refinery; Publichnoe Aktsionernoe Obschestvo Udmurtneft Imeni VI Kudinova; RN Komsomolskiy Refinery; RN Nyaganneftegaz; RN Uvatneftegaz; RN Yuganskneftegaz; Taas Yuryakh; Neftegazodobycha. IMPLICATIONS The Treasury Department stated that as a result of its action, all property and interests in property of the designated or blocked persons that are in the United States or in the possession or control of US persons are blocked and must be reported to OFAC. Violations of US sanctions may result in the imposition of civil or criminal penalties. The sanctions notice also warned that “foreign financial institutions that conduct or facilitate significant transactions or provide any service involving Russia’s military-industrial base” run the risk of being sanctioned. It said that transactions with the newly designated entities “may risk the imposition of secondary sanctions on participating foreign financial institutions.” An analyst summarized the risk: “A Chinese bank, a UAE oil trader, an Indian refinery – if any of them transact with those Russian companies, they could be hit with US sanctions.” In response to the new sanctions, Reliance Industries, which runs India’s largest oil refining complex, has stated that it will “re-calibrate” its imports of Russian oil in line with Indian government guidelines, including a halt to purchases from the two Russian oil companies, according to a report in the Financial Times on 23 October. +
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