The US is preparing for a new phase of sanctions pressure on Russia. Following its adoption by the Senate, the bill on sanctions against Moscow is expected to pass the House of Representatives as early as September. The bill provides for tough measures against Russia’s oil and gas sectors, banks, officials and the shadow fleet, as well as the possibility of imposing tariffs of up to 100 per cent on countries that are among the largest buyers of Russian energy. Meanwhile, the European Union has already introduced its 21st sanctions package, stepping up pressure on Russia’s energy sector, financial sector, cryptocurrencies and the shadow fleet.
Could the new US and European sanctions mark a turning point? How effective are restrictions on Russian oil, the ‘shadow fleet’ and banks? And most importantly, can sanctions force the Kremlin to change its policy and reduce funding for the war against Ukraine? We discuss these questions with Olena Yurchenko, Director of Analytics, Research and Investigations at the Economic Security Council of Ukraine.
In brief:
- The US is preparing a major new blow against Russia. The Senate has already backed the bill on ‘hellish sanctions’, and the House of Representatives is expected to pass it in September. The bill provides for sanctions against the Russian leadership, oligarchs, the military-industrial complex and the shadow fleet, as well as tariffs of up to 100 per cent for countries that buy Russian oil and gas.
- Washington wants to pressure not only Russia but also those that help it earn money from energy exports. China and India have become key buyers of Russian oil, so potential US tariffs could force them to reduce purchases or demand even larger discounts from Moscow.
- Sanctions are gradually shifting from targeting individual Russian companies towards tackling the entire system used to circumvent restrictions. This includes banks, insurers, traders, ports, intermediaries, crypto platforms and companies in third countries.
- One of the main targets is Russia’s ‘shadow fleet’. Hundreds of old tankers with opaque ownership help Moscow transport oil while circumventing Western restrictions. The most effective approach is to sanction not only the vessel itself but the entire infrastructure around it – owners, managers, insurers, banks and ports.
- The EU’s 21st sanctions package was more systematic. Europe stepped up pressure on Russian banks, crypto platforms, the shadow fleet, the oil sector and the military-industrial complex, and also added to its sanctions lists a number of companies from third countries that help Russia circumvent the restrictions.
- The main problem is not the number of sanctions, but their enforcement. Russia continues to find new routes, intermediaries, banks and payment mechanisms. The effectiveness of sanctions will therefore depend on the West’s ability to identify and punish violators, particularly in third countries.
- Sanctions alone will not stop the war, but they can reduce Russia’s ability to finance it. The most vulnerable link is the ‘oil – maritime logistics – international payments’ chain. If oil revenues are reduced, access to technology restricted and controls over finance and logistics tightened at the same time, Russia’s economic buffer will gradually shrink.
Let’s start with the main news. The US Senate has already backed a new bill imposing sanctions on Russia, and the House of Representatives is expected to pass these ‘hellish sanctions’ in September. How realistic is that scenario?
The likelihood of passage is high, but not 100 per cent. Its smooth passage through the House of Representatives may be delayed because the bill gives Trump overly broad tariff powers, a source of concern for Democrats. Democrats are prepared to support tariff powers relating to Russia, but are wary of similar powers targeting countries that buy Iranian oil (primarily China), which could trigger an even larger crisis in international energy markets. Overall, the bill has had a difficult path, and for a long time it served more as leverage in the context of a broader peace process aimed at resolving the conflict, to encourage the Russian Federation to take a more conciliatory position in negotiations. Its successful passage would mean a definitive US departure from the role of mediator.
What exactly does this document provide for? What would potential 100 per cent tariffs on goods from countries that buy Russian oil and gas mean for Russia and its partners?
It provides for mandatory sanctions against the Russian Federation’s senior leadership (including Putin), oligarchs, state-owned enterprises and companies supporting Russia’s military-industrial complex, as well as tariffs of up to 100 per cent (down from the 500 per cent initially proposed) on imports from the five countries that buy the most Russian oil or gas. In addition, the draft includes the Shadow Fleet Sanctions Act, a separate law on sanctions against the shadow fleet, insurers and shipowners.
Why is the pressure this time aimed not only at Russia itself, but also at countries that buy Russian energy? To what extent could this change the behaviour of China, India and other major buyers?
The Kremlin’s main resource is not oil itself but the ability to turn it into export revenue. Buyers, banks and logistics operators are what make that possible.
Because sanctions against a Russian company do not work to their full effect if its products continue to be sold through a foreign trader, paid for through a third bank and transported on a vessel under a foreign flag. The Kremlin’s main resource is not oil itself but the ability to turn it into export revenue. Buyers, banks and logistics operators are what make that possible. After 2022, Moscow redirected its oil exports to China, India, Turkey and the UAE. Even with fairly large discounts because of sanctions risks, Russia was still earning billions from energy exports. The concentration is enormous. According to the EIA, in 2024 China received an average of 2.2 million barrels of Russian crude oil and condensate per day, while India received 1.7 million. China and India accounted for the vast majority, 81 per cent, of Russian exports destined for Asia and Oceania. In June 2026, according to KSE Institute estimates, India increased its purchases of Russian oil to 2.6 million barrels per day, while China increased its purchases to 1.2 million. The threat is particularly significant for India: in 2025, the US imported $103.8 billion worth of Indian goods. For China, the US market is even larger – $308.7 billion in goods imports. The maximum tariff therefore creates a far greater potential loss than the benefit of a discount on Russian oil. At the same time, this would not necessarily lead to a complete halt in purchases of Russian oil. India may reduce purchases or demand a significantly larger discount from Russia. China, which has greater scope for a political and trade response to the US, is more likely to seek exemptions, use intermediaries or shift payments and logistics into less transparent channels. What will therefore matter is not the declaration of a 100 per cent tariff, but the actual rate, the absence of broad waivers and controls on the origin of goods to prevent simple re-export through a fourth country.
Can we say that the US is moving from sanctions against Russia to sanctions against the entire system that helps Moscow circumvent the restrictions?
The model is therefore gradually shifting from ‘sanction a Russian company’ to ‘deny it access to international infrastructure’. This is much more effective.
I would say they are returning to that approach. Under the Biden administration, the US was most active in imposing so-called secondary sanctions targeting intermediaries in third countries. However, these were targeted sanctions against individual companies, not tariffs on entire countries or goods. The Trump administration, at least in its approach to Russia, is more inclined to use tariffs as a sanctions tool, although it continues to use traditional sanctions instruments in relation to Iran. Broadly, these are secondary sanctions in the form of tariffs – or, more precisely, the threat of imposing them. The EU is taking a similar approach: the 21st package covered foreign banks, crypto platforms, oil traders, refineries, bunkering vessels and even a crewing agency. The model is therefore gradually shifting from ‘sanction a Russian company’ to ‘deny it access to international infrastructure’. This is much more effective, because Russia can rename a company, but it is much harder to replace a bank, insurer, port, ship manager, equipment manufacturer and sales market at the same time.
There is another key element – the shadow fleet. What does Russia’s ‘shadow fleet’ consist of today, and how damaging could sanctions against vessels, owners, insurance companies, ports and other participants in this system be for Russia?
The shadow fleet is not a single, formally registered fleet, but a network of mostly old tankers with opaque ownership structures, frequent changes of name, flag and manager, insurance outside the leading International Group P&I Clubs, AIS manipulation, ship-to-ship transfers and the use of little-known traders.
According to the latest KSE Institute data, in June 2026 alone, 180 loaded shadow-fleet tankers either left Russian ports or were involved in transhipment; 94 per cent of them were more than 15 years old. Tankers with international IG P&I insurance carried only 35 per cent of Russian crude oil. As of 27 July, the US, the EU, the UK, Canada, Australia and New Zealand had sanctioned a total of 681 individual oil tankers. The best results come from sanctioning not only the vessel itself but the entire ecosystem. A vessel can be renamed or transferred to a new shell company. It is much harder to operate if the owner, manager, insurer, flag registry, fuel supplier, crewing company, bank and port of destination are all blocked at the same time. Ports and financial and insurance infrastructure are the critical points: a tanker may ignore a Western sanctions list, but it still has to load and unload somewhere, settle payments and pass through straits.
In July, the EU adopted its 21st sanctions package. It includes new restrictions on more than 40 shadow-fleet vessels, banks, crypto platforms, oil refineries and Russia’s military-industrial complex. Are European sanctions becoming more effective?
With each successive package, the EU is becoming increasingly ambitious in its use of secondary sanctions.
Yes, the 21st package was noticeably more systematic. On 23 July, the EU added 218 sanctions listings: 48 individuals and 170 legal entities. It sanctioned 94 banks and major financial institutions, extended the ban on transactions to 33 Russian financial institutions, imposed restrictions on 14 crypto platforms in third countries, added 41 vessels to the 632 already sanctioned, and added 8 companies and one individual from the shadow-fleet ecosystem. Fifty-one companies were added to the export list, 27 of them based outside Russia: in China and Hong Kong, Turkey, Kyrgyzstan, India, Kazakhstan and the UAE. Three Russian oil refineries, a major Belarusian oil refinery and 56 entities in Russia’s military-industrial complex were sanctioned separately. With each successive package, the EU is becoming increasingly ambitious in its use of secondary sanctions. At the same time, it is important to understand that effectiveness and impact are difficult to measure in the short term: the Russian economy began to show critical signs of crisis only in 2025, three years after sanctions were imposed.
At the same time, the European Union has left the mechanism for capping the price of Russian oil in place until July 2027, without any automatic reduction. Is this instrument losing its effectiveness, and is a further cut to the price cap needed?
A further reduction makes sense only alongside stricter controls on insurance, bank payments, inflated transport costs, price documentation and ship-to-ship transfers.
The EU has not suspended the price cap or left it at $60. The current European cap on crude oil is $44.1 per barrel. The EU has suspended automatic adjustment of the cap until July 2027 so that high global prices caused by the crisis surrounding the Strait of Hormuz do not automatically raise it. The problem today is not so much the level of the cap as its enforcement. In June, Urals crude was trading at around $61 per barrel, almost $17, or 38 per cent, above the European cap. At the same time, only 35 per cent of crude oil was transported by tankers with IG P&I insurance. This means that a significant share of exports is already outside the infrastructure through which the cap can be monitored. A further reduction makes sense only alongside stricter controls on insurance, bank payments, inflated transport costs, price documentation and ship-to-ship transfers. Otherwise, a lower figure on paper will simply increase use of the shadow fleet. In addition, the US still has a different cap, at $60, which weakens the unity of the regime.
To what extent does Russia currently depend specifically on oil revenues? If oil exports are hit, could this realistically affect the Kremlin’s ability to finance the war?
The direct share of oil and gas revenues in the federal budget has declined, but that does not mean the dependence has disappeared. Between January and July 2026, Russia received 4.595 trillion roubles in oil and gas revenues and 17.518 trillion roubles in non-oil-and-gas revenues. Total revenues amounted to 22.112 trillion roubles, meaning oil and gas revenues accounted for 20.78 per cent. Oil and gas revenues fell by 16.8 per cent year on year. At the same time, the budget deficit for the first seven months reached 6.455 trillion roubles, or 2.8 per cent of GDP – already 1.7 times the deficit initially planned for the whole of 2026, which was 3.786 trillion roubles. The Russian Ministry of Finance partly attributes this to the front-loading of expenditure, so the seven-month deficit cannot simply be extrapolated to the full year. Oil is important not only because of direct taxes. It provides foreign-exchange earnings, underpins the rouble exchange rate, generates profits for state-owned companies, provides dividends, regional tax revenues and investment, and supports the ability to import critical goods. A decline in oil exports or prices therefore has a broader impact than the 20.8 per cent share suggests.
Russia has learnt to circumvent sanctions through third countries, intermediaries, cryptocurrencies and complex financial schemes. Where are the main ‘loopholes’ in the sanctions regime today?
The first is the vast Asian market, above all China and India. The second is the shadow fleet, opaque insurers, flags with weak oversight and ship-to-ship transfers. The third is banks and payment intermediaries in third countries, Russia’s SPFS, crypto platforms and networks such as A7. The fourth is the re-export of Western components through China, Hong Kong, Turkey, the UAE, Kazakhstan, Kyrgyzstan and other jurisdictions. The fifth is the rapid creation of new companies to replace sanctioned ones, nominee owners and insufficient transparency around beneficial ownership.
Are sanctions alone enough? What else must the West do to ensure that sanctions pressure translates into real economic losses for Russia?
Sanctions are a legal prohibition; economic losses arise only when that prohibition is systematically enforced.
Sanctions are a legal prohibition; economic losses arise only when that prohibition is systematically enforced. The EU has a fragmented sanctions-enforcement system and little practical experience in this area, while the US is the most experienced and has historically borne this responsibility because of the long reach of US jurisdiction through the dollar. Enforcement – that is, prosecuting and punishing violators – is the main Achilles’ heel of the sanctions regime. A prerequisite for greater effectiveness is a return by the US to the sanctions coalition and to international working groups, and the closest possible coordination of collective steps by member states. It is also important to strengthen enforcement in this area: to search for, identify, investigate and punish violators, particularly in third countries. Shuttle diplomacy is also needed with third jurisdictions that serve as hubs for sanctions circumvention. Finally, alternatives to Russian products are needed on international markets to avoid supply shortages and, consequently, windfall profits for the Russian Federation.
How closely coordinated do US and EU actions need to be? If Washington tightens sanctions while individual countries continue to buy Russian energy, how much does that reduce the impact of the sanctions?
Coordination is critical. The US controls access to the dollar system and the American market, while the EU and the UK control a significant share of insurance, maritime, brokerage and port services. If these instruments are applied at the same time, intermediaries risk losing access to finance, insurance, logistics and sales markets all at once; without US participation, sanctions imposed by other jurisdictions are only half as effective.
Do you see a risk of sanctions fatigue in the West? Russia is now in its fifth year under a huge number of restrictions – why have sanctions still not forced the Kremlin to end the war?
There is a risk of fatigue, especially when sanctions impose costs on Western businesses and consumers but produce no immediate political result. But it is wrong to assess sanctions solely by whether ‘the war has ended’. Sanctions can reduce revenues, raise import costs, lower the quality of components and restrict investment without forcing an authoritarian regime to abandon its strategic objective immediately. Russia has been able to continue the war because of high oil revenues, the reorientation of exports towards Asia, pre-war reserves, capital controls, tax increases, domestic borrowing and the shifting of costs onto the civilian economy. But its buffer is shrinking.
Which sector of the Russian economy is currently most vulnerable to a new sanctions blow – energy, the banking system, the military-industrial complex or logistics?
The sector most vulnerable to a rapid macroeconomic blow is not simply energy, but the ‘oil exports – maritime logistics – international payments’ chain. It is this chain that simultaneously provides foreign currency, budget revenues and the ability to finance imports. There are physical bottlenecks here: tankers, straits, ports, insurance, major buyers and banks. The banking sector is a mechanism for transmitting pressure, but it is largely confined within Russia and can be temporarily supported by the state. The military-industrial complex is strategically vulnerable because it depends on CNC machine tools, microelectronics, sensors, chemical components and industrial software, but the effect builds more slowly there: Russia is drawing on stockpiles, cannibalising equipment and obtaining supplies through China. For an immediate financial impact, the priority is therefore oil and logistics; for the long-term weakening of military capabilities, it is the technological base of the military-industrial complex.
And the main question: under what conditions can sanctions become not merely a tool of pressure, but a factor that actually forces Russia to the negotiating table on terms acceptable to Ukraine?
Russia must lose the expectation that it can offset the economic costs through military successes. Sanctions without stable military support for Ukraine will therefore not create the necessary balance.
First, Russia must lose the expectation that it can offset the economic costs through military successes. Sanctions without stable military support for Ukraine will therefore not create the necessary balance. Second, the pressure must be long-term and predictable: substantially lower oil revenues, restricted access to technology, high borrowing costs, a budget deficit and shrinking liquid reserves must all operate simultaneously. Third, any sanctions relief must be gradual, reversible and tied to verifiable actions, not declarations about negotiations. Fourth, Russia must see unity among the US, the EU, the UK, Canada, Japan and other partners. If the Kremlin expects sanctions to be eased after an election, an energy crisis or a change of government, it has an incentive to prolong the war.
Author: Svitlana Mialyk
