New EU sanctions on Russian oil hit headwinds from maritime states

Greece and Malta have emerged as the principal sources of resistance to a European Union proposal to replace the current price cap on Russian oil with a ban on the services required to ship the fuel, people familiar with the discussions told Bloomberg.

The concerns were raised at a meeting of EU ambassadors on February 9, where the bloc’s latest sanctions package was presented. According to the sources, the two southern European countries warned that abandoning the price cap in favour of a services ban could negatively affect Europe’s shipping industry and push up energy prices. The people spoke on condition of anonymity because the deliberations were private.

The sources said Greece and Malta also sought further clarification on proposals to sanction foreign ports that handle Russian oil and to tighten oversight of ship sales in an effort to prevent vessels from ending up in Moscow’s so-called shadow fleet.

A spokesperson for the Greek government declined to comment, while the Maltese government did not immediately respond to a request for comment.

The debate follows a proposal unveiled last week by the European Commission, the EU’s executive arm, to scrap the existing price cap on Russian oil sales and instead prohibit the insurance, transport, and other services needed to move the oil. The move reflects growing doubts about the effectiveness of the price cap in significantly reducing Russia’s oil revenues. The services ban is the central element of the EU’s 20th sanctions package targeting Moscow over its full-scale invasion of Ukraine, now entering its fifth year.

Under the proposal, the measure would only take effect with the backing of the Group of Seven nations, which jointly introduced the oil price cap at the end of 2022. The sources said the US position on the proposed shift remains unclear. Before the price cap was adopted, the EU had already imposed bans on many maritime and related services.

In parallel, the EU is considering lifting sanctions on two Chinese banks after receiving commitments from Beijing regarding its support for Russia’s war against Ukraine, the sources said. The European Commission did not immediately respond to a request for comment.

The two banks in question — Heihe Rural Commercial Bank and Heilongjiang Suifenhe Rural Commercial Bank — were sanctioned by the EU last August, prompting China to retaliate by targeting two small banks within the EU. Some of the sources said China remains Russia’s primary enabler during the war, supplying Moscow with most of the critical components it needs to manufacture weapons.

Despite the possible easing of measures on the two Chinese banks, the EU’s latest sanctions package includes proposals to blacklist several companies in China and other countries accused of supplying key components to Russia’s war machine. The package also targets cryptocurrency operators, as well as a small number of banks in Central Asia and Laos that Brussels says are helping Russia evade existing sanctions.

In addition, the EU has proposed activating its anti-circumvention instrument for the first time. This would involve banning the export of machine tools and certain radio equipment to Kyrgyzstan. Germany, however, has expressed concerns that such a step could damage its bilateral relations with the country. As an alternative, the sources said, Brussels could introduce export quotas based on pre-war trade levels instead of imposing a full ban. Spokespeople for the German government did not immediately reply to requests for comment.

The proposed sanctions package also includes new export restrictions valued at more than €360 million ($429 million) on goods such as rubber and chemicals, along with import bans worth more than €500 million, including on several types of metals. It would also introduce a quota on ammonia imports.

All EU sanctions require unanimous approval by member states, and the measures could still change before adoption. The bloc is aiming to finalise the package by the end of February.

By Tamilla Hasanova