We reached the barrel: The EU has agreed on the most widely publicized 18th package of sanctions

The 18th package of sanctions, agreed by the European Union on July 18, can be called the "most widely touted," but not really effective, analysts interviewed by Izvestia say. The new list of restrictions includes 22 Russian banks, one LNG company, and three Chinese enterprises that allegedly exported military-industrial complex goods to Russia. Rosneft's refineries in India are also on the list, which may provoke a reaction in New Delhi. The package also includes measures against Nord Streams, which are already not working, and the most controversial provision is the new ceiling on oil prices. A number of countries opposed its reduction, including Malta, Greece and Cyprus. In general, Slovakia has been hindering the adoption of the new package for a long time, but on the eve Bratislava changed its mind. Most likely, the EU put pressure on the republic, experts say.

What is included in the 18th package of EU sanctions

On July 18, the EU countries approved the 18th package of sanctions against Russia. They will come into force after the list is published in the official journal of the EU.

The new list includes restrictions against one Russian LNG company, Nord Streams, the Rosneft oil refinery in India, as well as against 22 Russian banks. In addition, the EU decided to cancel the permit for the Czech Republic to import oil from the Russian Federation. It is noteworthy that the ban on purchases from third countries of petroleum products made from Russian raw materials does not apply to the USA, Switzerland, Great Britain, Norway and Canada. The list also includes three Chinese companies that allegedly exported military-industrial complex goods to Russia. Thus, the total number of persons on the sanctions list exceeded 2.5 thousand.

One of the most controversial issues remains lowering the ceiling on Russian oil prices to about $47.6 per barrel. The current level has been in effect since December 2022. In February 2023, it was $100 per barrel for "light" petroleum products (diesel fuel, gasoline) and $45 per barrel for "dark" (fuel oil). Several members of the association were hindered by the approval of the price ceiling. Among them are the Mediterranean countries, including Malta, Greece and Cyprus. Disagreement was also expressed outside the bloc, for example, in the United States.

There are countries that, in principle, are unhappy with the EU's sanctions pressure on Russia, as this boomerang affects their energy security. Representatives of Hungary have repeatedly spoken about this, but Slovakia mainly prevented the adoption of the 18th package. Bratislava has been blocking the agreement all this time due to the EU's decision to gradually phase out any Russian energy sources. The ban on Russian gas imports from 2028 may cause shortages, higher prices and increased transit fees, and also provoke lawsuits from Gazprom.

However, on the eve of the adoption of the new package, the Slovaks changed their minds. Although back in early June, Prime Minister Robert Fico stated that the country would not support the 18th package of sanctions if the EC did not resolve the problem with Russian energy resources. "It would be counterproductive to continue blocking the 18th package of sanctions tomorrow. All possibilities have been exhausted at the moment, and maintaining our blocking position would already jeopardize our interests," Fico said.

It is unlikely that the European Union really gave any guarantees to Bratislava - most likely, they just gently "pressed" there, political analyst Alexei Fenenko tells Izvestia.

— If Brussels stops allocating money for road construction and infrastructure development, then small countries like Slovakia, of course, will immediately be ready to make concessions. There is a whole package of EU infrastructure development programs throughout Eastern Europe. This is an ideal lever of pressure on these countries," the expert believes.

What will be the effect of the new measures

The 18th package can be called the "most widely promoted" rather than some really effective one.

— It contains sanctions against Nord Streams, which are already not working. The main information feature was the new ceiling on oil prices, although initially the Europeans wanted to include a roadmap for canceling purchases of Russian gas in this package. But since Belgium and France may suffer from these restrictions, they were abandoned. And the new price ceiling doesn't really change anything," Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, told Izvestia.

According to industry experts interviewed by Izvestia, the 18th package of EU sanctions against Russia in the fuel and energy sector is really noticeable in terms of scale, but its effectiveness will be limited by a number of factors.

The sanctions on 105 tankers, which the EU classifies as a shadow fleet, are a continuation of previous restrictions (189 tankers in the 17th package), says Dmitry Kasatkin, managing partner of Kasatkin Consulting.

— The goal is to complicate the logistics of Russian oil supplies. But the real effectiveness depends not on the number of vessels on the list, but on the ability of the EU and G7 countries to control the insurance, maintenance and loading of these vessels. Even if part of the fleet falls out, Russia will find a replacement — with rising rates and more expensive logistics, he believes.

According to him, the decision to lower the price ceiling to $47.6 is an important signal. This will strengthen the Urals discount to Brent, especially in the case of rising global prices.

The effectiveness of the ceiling also depends on its compliance: in reality, Russia and its buyers have long gone into over-the-counter trading with settlements outside the dollar and SWIFT zones, and a number of transactions are above the ceiling. The United States and the G7 have not yet agreed on a new cutoff, and the US Treasury, as of the end of June, had not approved a reduction of less than $60. Without coordination with Washington, the ceiling of $47.6 will remain, rather, a recommendation position of the EU, which does not have full legal force at the global level, the source said.

Sanctions against the Indian company Nayara Energy Limited (49.13% of which belongs to Rosneft), which owns the refinery, is a potentially risky step, industry experts believe.

Currently, Russia exports about 4 million barrels per day, despite the fact that China and India practically divide these volumes in half, Ekaterina Kosareva, managing partner of VMT Consult, recalls.

— I do not rule out that sooner or later there will be a reaction from New Delhi. Even if we don't see it at the diplomatic level, European consumers will feel it for themselves. Gas station price tags will clearly respond to these restrictions, as India is one of the largest fuel suppliers to Europe, the expert notes.

Which banks will be subject to new EU sanctions

Sanctions in the financial sector usually cause more difficulties. This time, the EU naively believes that after the introduction of restrictions against 22 Russian banks, the Russian Federation will "run out of money." So far, the list of credit institutions has not been disclosed. Izvestia sent a request to the Central Bank about the impact of such measures on the infrastructure of cross-border payments.

"The EU imposes sanctions against banks if they help circumvent existing restrictions, participate in the export of sanctioned goods, finance defense projects, or are associated with people and companies that have already been sanctioned," explained the expert of the international legal service. Razmorozka.com Olga Plekhanova.

According to her, the size of assets is not considered the main selection criterion — the functional role of the bank is a priority. The main reason remains the connection with the military-industrial complex and the state, as well as services in cross-border settlements.

However, the vast majority of large Russian credit institutions, which account for over 75% of the banking system's assets, have long been under restrictions. Therefore, the new measures mainly concern small financial organizations. These are often small regional banks that serve foreign economic activity, experts explained.

In addition, banks from Russia-friendly countries are also subject to the 18th package if payments are made through them bypassing sanctions. The new European regulations explicitly allow restrictions to be imposed on any players who help circumvent bans, regardless of their size.

— New restrictions at the moment may temporarily increase the costs of individual exporters and importers. But, as the experience of previous years shows, solutions that allow for the necessary calculations will be found quickly," says Boris Kopeikin, chief economist at the Stolypin Institute for Growth Economics.

Companies have learned how to quickly reconfigure flows using alternative routes and tools. Even if Russian banks are completely disconnected from SWIFT, foreign trade will not stop, but will simply continue to change.

Interestingly, the EU has imposed a complete ban on transactions with the RDIF and its subsidiaries. "A month ago, the head of the European Commission, Ursula von der Leyen, called for strengthening and imposing additional restrictions on the Russian Direct Investment Fund due to the fact that it contributes to the settlement of the Ukrainian conflict, promotes dialogue between Russia and the United States and invests in the growth of the Russian economy," commented the head of the Russian Direct Investment Fund and the special representative of the President of the Russian Federation for investment andKirill Dmitriev, economic cooperation with foreign countries. Brussels is adopting sanctions that are destructive for the Europeans themselves, depriving its consumers of stable energy supplies and closing the Russian market to European companies, he added.

The market reacted very calmly to the 18th sanctions package. In the morning, the ruble remained stable at about 78 per dollar. In the coming months, a weakening of the Russian currency is possible, but the reason is not sanctions, but the gradual recovery of imports and a decrease in export earnings against the background of low oil prices (about $ 70 per barrel of Brent). However, the EU sanctions certainly add to the risks of a weakening ruble in the period from August to October. The exchange rate may drop to 80 rubles per dollar by the end of the month, independent expert Andrey Barkhota added.