Are EU sanctions on Russian energy really 'slow and steady'? The Russian economy is on track to become Europe's No. 1

The difficulty of “pleasing” all member states has led to lengthy negotiations and “diluting” of EU sanctions against Russian energy.

The EU's implementation of Russian energy sanctions is proceeding slowly. (Source: RIA Novosti)

In a recent article in UK in a changing Europe , Dr. Francesca Batzella, senior lecturer in politics and international relations, University of Hertfordshire (UK) analyzed the development of the European Union's (EU) energy sanctions against Russia.

While the EU is “slowly but surely” expanding its role, its ability to impose sanctions has been constrained by the many energy policy priorities of member states, the expert stressed.

Deep divisions

Before the conflict in Ukraine (February 2022), the EU was heavily dependent on Russian fossil fuels. In 2020, the union imported 46.1% of its natural gas from Russia. However, the level of dependence varied across the EU, with some countries such as Lithuania, Slovakia and Hungary being more dependent than others.

The EU could still impose energy sanctions on Russia, though, which would be a significant and unprecedented move.

However, the implementation of Moscow’s energy sanctions has been slow, with restrictions on coal, oil and, most recently, liquefied natural gas (LNG). Divisions among member states have led to lengthy negotiations and frequent “diluting” of the measures.

Looking back over the past two years, the rise of EU energy sanctions on Russia has been clear to all, with negotiations revealing divisions between member states over energy policy.

After the conflict broke out, the debate focused on whether Russia should have been sanctioned in the first place. Countries such as Austria, Hungary and Italy wanted more limited sanctions while the Baltic and Central-Eastern European member states wanted tough and immediate measures.

Another divide has emerged over which energy sources to target. While some countries, such as France, appear willing to consider sanctions on fossil fuel imports, others – such as Austria, Germany, Italy, Slovakia and those dependent on Russian energy – are opposed to sanctions on oil and coal imports.

Significant energy restrictions were finally agreed in the fifth package of sanctions (April 8, 2022), with a ban on the purchase, import or transport of coal and other solid fossil fuels into the EU if they originated in Russia or were exported from the country. During the negotiations, countries less dependent on Moscow’s coal pushed for an immediate ban, while those more dependent demanded a longer transition period.

Several EU leaders have called for sanctions on oil and gas at this stage, with European Commission President von der Leyen and European Council President Charles Michel arguing that further measures on fossil fuels will be needed “sooner or later”.

But there remains division among member states, with those more dependent on Russian fossil fuels such as Hungary, Germany and Austria firmly opposed while France, Italy, Poland and the Baltic states push for further sanctions.

Intense negotiations continued and energy sanctions were agreed in the sixth package (June 3, 2022) with a partial oil embargo. Once again, there was a dividing line between countries calling for an immediate oil embargo and those opposed. This time, additional factors emerged.

Landlocked countries such as Slovakia and the Czech Republic have expressed concern because they rely on Russian oil transported via pipelines and have no access to alternative sources. Greece, Cyprus and Malta are concerned that banning EU services to transport Russian oil would hurt their commercial interests.

To address these concerns, the European Commission has presented an “adjustment proposal” to Hungary, Slovakia and the Czech Republic by giving them more time to prepare for the change in energy supply and helping to upgrade their oil infrastructure.

A partial embargo covering oil and petroleum products but allowing temporary exemptions for crude oil transported via pipelines was eventually agreed. A transition period was also put in place to address concerns raised by Greece, Malta and Cyprus.

Although some member states have called for sanctions on gas and nuclear energy, further sanctions including price caps were only introduced in the eighth package (October 5, 2022). This price cap allows European operators to ship Russian oil to third countries, provided that the oil price remains within the predetermined price ceiling.

Again, Greece, Cyprus and Malta expressed concerns that the measure would hurt their economies by making their businesses dependent on other countries. Ultimately, the EU had to make some concessions in the package to address these concerns.

LNG 2 project in Russia's Arctic. (Source: TASS)

Slow and limited effect

Two years into the conflict in Ukraine, EU energy sanctions on Russia have been slow to come into force. Moreover, they are limited and target only a few products. And until recently, the sanctions have ignored gas – Russia’s strategic commodity and the EU’s most important energy source.

Some Russian LNG sanctions were not officially included in the 14th package of sanctions until June 2024. The sanctions ban Russian LNG refueling services in the EU. Like many other energy measures, this is not a complete embargo.

Instead, the EU banned Russian gas exporters from using union ports to transfer gas between large tankers and smaller vessels destined for third countries, but stopped short of an outright ban on bloc countries buying the fuel.

Hungary and Germany have been in a blocking minority in these negotiations. Berlin opposes the so-called “Russia-free clause” that would prohibit EU companies’ subsidiaries in third countries from re-exporting goods to Russia.

The slow and incremental negotiations show that the EU is gradually emerging as a party capable of imposing sanctions. “Slow” because of internal constraints among member states, and “sure” with 14 sanctions packages passed since the conflict in Ukraine broke out.

The EU has implemented 14 packages of sanctions against Russia, including measures targeting the country's energy sector. However, the sanctions are said to have not achieved the desired effect.

According to data released by the World Bank (WB) last July, Russia has become the world's fourth largest economy in terms of purchasing power parity (PPP). Previously, President Vladimir Putin announced that the Russian economy is growing and becoming the largest economy in Europe. In April, the International Monetary Fund (IMF) also predicted that the Russian economy will grow faster than all developed economies in 2024.

Russia's GDP is forecast by the World Bank to grow by 3.2%, surpassing the expected growth rates of the US, UK, Germany and France. Despite 14 unprecedented sanctions packages from the West, the Russian economy is still showing its strength.

According to analysts, the embargo and price cap policy only caused the flow of Russian energy to change direction, from the West to the East. Russian oil and gas revenue in the first half of this year increased by more than 40% compared to the same period last year, reaching more than 65 billion USD.

Clearly, the EU’s ability to impose sanctions on Russia has been severely hampered by the multiple energy policy priorities that prevail across member states. This has led to lengthy and fraught negotiations, resulting in insufficient sanctions.

Source: https://baoquocte.vn/the-eu-phat-lenh-vao-nang-luong-nga-co-thuc-su-cham-ma-chac-nen-kinh-te-xu-bach-duong-tren-da-chiem-vi-tri-so-1-chau-au-283521.html