The European Union is launching its 17th sanctions package against Russia in response to its unprovoked invasion of Ukraine. However, the foundation on which the West has relied to exert economic pressure on Moscow has been destabilized by former US President Donald Trump and various aspects of the transatlantic security alliance.
The Trump administration has openly discussed the possibility of easing sanctions on Vladimir Putin’s Russia and enhancing economic ties, even before receiving any concessions from the Kremlin.
Is President Trump motivated by plans to establish a Trump hotel in Red Square, or is he making a reckless gamble that Mr. Putin will respond favorably to the allure of relaxed sanctions?
A price cap on Russian oil exports was implemented, but Russia has managed to bypass it.
Nonetheless, this presents yet another challenge for the EU in its efforts to maintain international pressure on Russia.
“We do not want to see concessions on sanctions made prematurely, nor in the context of a temporary ceasefire [in Ukraine],” he told RTÉ News.
“Instead, we prefer to see such concessions happening within the framework of a lasting and sustainable peace,” Mr. O’Sullivan stated.
The phone call
The situation originated from the phone call on February 12 between Mr. Trump and Mr. Putin.
After pressuring Ukraine’s President Volodymyr Zelensky into agreeing to an unconditional 30-day ceasefire, Mr. Trump settled for a much narrower ceasefire over the Black Sea when Mr. Putin refused to accept the longer truce.
Not only did the Black Sea ceasefire, negotiated between US and Russian officials in Saudi Arabia on March 25, favor Russia more than Ukraine, but it also came with some surprising demands from Russia.
Russia requested that Rosselkhozbank, a state-owned bank, be reconnected to the SWIFT international payments system. Additionally, it sought the lifting of sanctions on companies, insurance brokers, Russian-flagged vessels, and equipment suppliers related to the food and fertilizer sectors.
“It appears that the critical moment may arrive in the second half of 2025, as indicators are flashing redder than before.”
The Trump administration expressed intent to “help restore Russia’s access to the global market for agricultural and fertilizer exports,” without clarifying the implications for sanctions lifting.
This raised alarm bells in Brussels.
Mr. Trump was offering something that only Europeans could concede, given that the SWIFT system is based in Belgium.
“The reestablishment of [Rosselkhozbank] to SWIFT is a European decision,” an EU official remarked.
“We have made it clear that we will not do that. I am uncertain how that will unfold, especially since the Russians attached a condition to the Black Sea ceasefire that involves lifting European sanctions, not US sanctions.”
Sanctions envoy David O’Sullivan emphasized that the EU would prefer not to see concessions made too quickly.
Brussels views this as a tactical maneuver by Russia to heighten tensions within the transatlantic relationship.
Some experts were baffled by the Russian demand, noting that neither food nor fertilizer from Russia has been subject to Western sanctions.
“It is unclear why this seemingly unreasonable demand was made,” stated Alexander Kolyander in a report for the Centre for European Policy Analysis (CEPA).
“Either those who proposed it (likely from Russia’s agriculture ministry) lack understanding of international finance, or the Kremlin hopes to leverage this demand to pressure the US into coercing Europe and deepening the transatlantic divide.”
Conjoined Kremlin strategies
Regardless, it has served notice to the EU that dismantling Western sanctions and prolonging the ceasefire process have become intertwined Kremlin strategies.
Since Mr. Putin’s invasion of Ukraine in February 2022, the EU, in coordination with the G7 and other allies, has imposed a series of sanctions that can be adjusted as needed.
The objectives are threefold: to prevent the Russian military from acquiring technology necessary for advanced weaponry, to cut off funds to the military-industrial complex, and to generally weaken the Russian economy.
Over 2,400 individuals involved in supporting the invasion have been sanctioned, coal and oil imports have been prohibited, and the export of dual-use goods and advanced technologies has been restricted.
The efforts have also resulted in the freezing of €200 billion in Russian Central Bank assets and the exclusion of Russian banks from SWIFT. Comprehensive export controls were enacted.
Since the sanctions began, Russia’s share of the EU’s global trade in goods has plummeted from €253bn in 2021 to €68bn in 2024.
The impact was not immediate; by last year, it seemed Russia was managing the situation fairly well.
Russia’s economy grew by 3.6% in 2023 and was projected to have expanded by 4.1% the previous year.
The country’s current account surplus was anticipated to exceed $60bn in 2024, an increase from $50bn in 2023, with high oil revenues keeping the budget deficit under control.
‘Crunch point’
Russia adeptly sourced Western technology for its military through third countries and compensated for lost trade with Europe by increasing commerce with China and India.
However, with a weakening ruble, persistent labor shortages, inflation at 10%, and interest rates at 21%, EU officials believe the Russian economy could reach a critical juncture by 2026, if not earlier.
“Toward the end of last year,” a senior EU official commented, “there were indications that the Russian economy could last until 2026.
“Currently, it seems the crunch point might arrive in the second half of 2025 as the indicators signal alarming trends.”
Despite ongoing sanctions circumvention, G7 sanctions have deprived Russia of over $450bn in revenue, increasing military component costs by 30% and delaying material deployment to the battlefield.
A woman is seen walking past a currency exchange in Moscow.
While Russia circumvented the G7 oil price cap by developing a shadow fleet of “ghost” tankers to transport oil globally at prices above the capped rate, the G7 has relentlessly targeted this by sanctioning approximately 400 vessels.
Consequently, flag states like Panama, Honduras, and Barbados have deregistered these ships, complicating their entry into international ports.
“Satellite images show that many of these ships are merely drifting at sea, with no destination,” a senior EU official highlighted.
This is why Mr. Trump’s overtures to Mr. Putin have infuriated European capitals.
Lifeline
The lifeline extended to Russia bolstered the ruble and provided both the Putin regime and the Russian populace with a much-needed psychological boost.
European capitals remain uncertain about rumors of the US lifting aviation sanctions, or if this would merely entail issuing licenses to select Russian airlines.
On April 10, TASS reported that Russia’s ambassador to the US, Alexander Darchiev, claimed that following bilateral discussions in Istanbul, both parties emphasized the importance of resuming direct flights to “enhance business connections and interactions”.
Mr. Trump has vaguely threatened tariffs or secondary sanctions against Mr. Putin for not aligning with his 30-day ceasefire proposition.
This has offered a slight sense of reassurance to European diplomats, even though these threats appear to lack substance.
“The Americans have adopted a two-pronged approach,” one source remarked.
“They state they will implement more sanctions, yet at times, when specific sanctions arise, they suggest these might be relaxed.
“It’s evident that the Americans regard sanctions as leverage over the Russians for whatever potential deal may emerge,” the source added.
This could also play to the EU’s advantage in dealing with Hungary’s Viktor Orbán, who has consistently tried to hinder EU efforts to pressure Russia.
On July 31, the EU is scheduled to renew a range of sanctions on Russia, encompassing restrictions on trade, finance, banking (including access to the SWIFT system), energy, fossil fuels, technology, dual-use goods, industry, transport, and luxury items.
As unanimity is required for the renewal, Mr. Orbán could jeopardize almost the entire sanctions initiative.
However, if the Trump administration signals to Mr. Orbán that sanctions remain a useful instrument in pressuring Mr. Putin, he may quietly withdraw his objections (few in Brussels currently trust any assurances from the Trump administration).
If that does not occur, the EU is already contemplating next steps.
Options on the table
One option is for 26 member states to codify the sanctions into their national laws and implement them that way; there is also discussion of leveraging Article 7 of the Lisbon Treaty to revoke Hungary’s voting rights in the Council of Ministers (a nuclear and less favorable option).
Increased speculation surrounds the potential phase-out of Russian LNG. Currently, the EU only prohibits trans-shipments of Russian LNG through its ports, although purchases of LNG have significantly declined.
The European Commission has proposed a non-binding target to eliminate all reliance on Russian fossil fuels by 2027, utilizing a combination of renewables and other resources, although details on the inclusion of sanctions or tariffs remain unclear.
Hungary and Slovakia have obstructed attempts to ban Russian LNG in the latest sanctions packages.
Vladimir Putin is pictured opening a natural gas liquefaction line in Murmansk.
There are suggestions that the EU could contemplate tariffs or quotas to phase out LNG, as these tariffs could generate revenue to address Hungary’s and Slovakia’s concerns, yet nothing has solidified yet.
Additionally, some European energy buyers propose that if a ceasefire occurs in Ukraine, Europe should resume Russian gas imports—not at the pre-invasion level of 157 bcm, but potentially closer to half that amount.
Much of this is entwined with the trade tensions involving Mr. Trump, who has criticized the EU for not purchasing enough US LNG.
Should Russian LNG face further phase-outs, the EU could increase its LNG sourcing from the US.
However, US LNG is pricier, and some countries, like Germany, already obtain 90% of their LNG from the United States.
Unity of purpose
In any case, the EU is eager to preserve a united front regarding Russia; officials are fully aware that any concessions made by the Trump administration to Russia could undermine the overall effort, even if EU sanctions carry a significantly greater weight.
“The strength of the sanctions has stemmed from the level of unity demonstrated by the G7+ coalition,” Mr. O’Sullivan stated, “and we are keen to maintain that unity.”
He continued: “The European perspective is that sanctions are significantly impacting the Russian economy and serve as a crucial bargaining tool in any negotiations.”
Mr. O’Sullivan believes the Trump administration understands this dynamic well.
“The messages we receive from Washington are somewhat contradictory,” he acknowledged.
“At times, there are discussions about enhanced economic cooperation, which might indicate lifting sanctions; at other times, there are talks of imposing additional sanctions on Russia.
“Our strong hope is to sustain this unity and retain the sanctions as an essential lever.
