European Union Proposes Sweeping New Sanctions on Russian Oil Exports

The European Union is preparing a major new escalation in its economic pressure campaign against Russia. The European Commission has formally proposed a broad ban on services that support Russia’s seaborne crude oil exports. This move is designed to significantly cut the revenue Moscow uses to fund its war in Ukraine.

Targeting the Lifeline of War Funding

For over two years, Western nations have sought to limit Russia’s income from its vast oil and gas reserves. While the EU banned imports of Russian seaborne crude oil in late 2022, Russian oil has continued to flow to global markets like India and China. This new proposal aims to tighten the noose by targeting the Western services that facilitate these shipments.

The proposed ban would prohibit EU companies from providing services including shipping, insurance, and financing for tankers carrying Russian oil worldwide. These services, particularly insurance through the London-based International Group of P&I Clubs, are crucial for the global oil trade. Without access to them, finding ships and insurance becomes far more difficult and expensive for Russian exporters.

Potential to Upend the G7 Price Cap

This aggressive step could render the existing G7 price cap mechanism obsolete. That policy, enacted in late 2022, allowed Western services but only if the Russian oil was sold at or below $60 per barrel. The goal was to keep oil on the market while limiting Russia’s profit.

The new EU proposal represents a strategic shift. By potentially removing all access to these services, the bloc is moving from trying to control the price of Russian oil to trying to restrict its flow more directly. Analysts note this could have a much sharper impact on Russian export volumes and, consequently, state revenue.

Global Ripple Effects for Major Importers

The impact of this proposal would extend far beyond Europe’s borders, directly affecting major importers of Russian crude. Countries like India and China have become the largest buyers of discounted Russian oil since the war began. They have relied on the availability of Western-insured tankers to transport it.

If passed, the sanctions would force these nations and global traders to rely on a smaller “shadow fleet” of older tankers, often with opaque insurance. This could drive up global shipping costs and create new logistical hurdles. It also raises the risk of environmental accidents from less-regulated vessels.

For Russia, the challenge would be to build or acquire enough independent shipping and insurance capacity to maintain its current export levels. Any failure to do so would mean reduced sales and a tighter squeeze on its war budget.

A Critical Juncture for EU Diplomacy

The proposal is now with the EU’s 27 member states, who must approve it unanimously. This process will test European unity, as some nations may have concerns about the plan’s impact on global oil prices and stability. The discussions are expected to be complex and could lead to modifications before a final deal is reached.

If enacted, this package would mark one of the most significant expansions of energy sanctions since the war began. It signals the EU’s willingness to leverage its remaining economic power in the services sector to apply maximum financial pressure on Moscow, accepting the potential for market disruption as a necessary cost.