EU committed to Russia sanctions despite rising energy prices

EU Sanctions Envoy David O'Sullivan said the EU is committed to maximizing the impact of sanctions on Russia, at a time when energy prices are rising in response to growing conflict in the Middle East.

"We will keep increasing the pressure: sanctioning companies tied to Russia's military-industrial complex, targeting financial institutions linked to Russian payment systems, and going after shadow fleet vessels," O'Sullivan told Platts, part of S&P Global Energy, Sept. 10.

Energy prices have risen in September, amid an escalation in the Middle East conflict that has seen an increase in disruptions to shipping in the region. Platts assessed Dated Brent at $120.31/b on Sept. 10, up from below $90/b at the end of August.

The EU approved its latest, 21st, package of sanctions against Russia in response to its invasion of Ukraine in July. It includes measures against some refiners in Russia and abroad, as well as sanctions on vessels and transaction bans on some traders for violating restrictions on the purchase of Russian oil.

A spokesperson for the European Commission said it would keep cooperating with member states and global partners to develop and apply new measures for as long as necessary.

"Between packages, we assess further steps to increase pressure, close loopholes and provide guidance, so that the measures we have agreed are applied properly and consistently," they said.

The EU has not announced a target deadline for approving its next package, with approval of previous packages not following a regular cadence and frequently linked to events during the conflict. Negotiations have sometimes proved difficult, with exposure to the impact of sanctions on Russia varying widely across the bloc.

Since Russia launched its full-scale invasion of Ukraine in February 2022, the EU has banned direct seaborne imports of most Russian oil, imports of products made from Russian oil in third countries and coordinated with the G7 and Australia on price caps for Russian crude and refined products.

O'Sullivan said sanctions had already cost Russia around €500 billion ($580 billion) directly and the real price is likely far higher when the wider economic consequences of the war are taken into account.

The EU did not follow the US in easing sanctions pressure on Russia earlier this year in response to the supply crisis triggered by the war in the Middle East. The US waived some sanctions on Russian oil from mid-March to mid-June.

This led to a narrowing of the discount on Russian crude, with Platts assessing Urals at a discount of $17.65/b to Dated Brent on April 14 – the narrowest discount in 2026 so far. Platts last assessed the discount at $22.05/b on Sept. 10.

Gas concerns

Europe is heading into the winter with gas storage facilities at lower levels than last year, which, combined with Middle East supply concerns, is putting pressure on prices.

Platts assessed the Dutch TTF gas month-ahead contract at €82.115/megawatt-hour Sept. 10 — the highest level since Dec. 29, 2022.

Gas storage continues to be filled, although at a slower pace than in previous years, the EU spokesperson said.

"We keep working with member states to ensure the necessary storage injection ahead of the heating season. Member states have flexibilities they can choose to activate to lower their filling target in duly justified circumstances," they said.

The EU estimates that its gas demand has fallen by 17% compared to levels before the supply crisis triggered by Russia's invasion of Ukraine.

"The EU can count on significant spare LNG import capacity allowing additional imports during the winter months, complementing storage usage in providing flexibility," the spokesperson said.

The EU's Gas Coordination Group concluded that there were no immediate concerns for the EU's gas supply security at a meeting Sept. 3, noting that based on historical projections, storage could still reach sufficient levels for adequate winter preparedness.