The EU is facing a collapse in support for new economic sanctions targeting Russia as national capitals refuse to back measures that could damage their corporate champions, diplomats have warned.
In a trend that could endanger a four-year-long strategy in support of Ukraine, a series of countries — including Greece, France, Italy, Germany, Austria and Portugal — have all demanded carve-outs from the latest slate of sanctions drawn up by Brussels, or have blocked proposed measures entirely.
Waves of sanctions since Russia’s full-scale invasion of Ukraine in 2022 have aimed to stem the financial flows sustaining Moscow’s war. But the demands from capitals have prompted concern that Europe is losing its willingness to tolerate the knock-on effects on EU companies still making money from trading with Russia, said five EU diplomats involved in the negotiations.
The EU cannot impose sanctions without unanimous support. The vetoes forced four days of talks among EU member-state ambassadors in Brussels over the past week without agreement.
That has raised fears that falling levels of internal solidarity, weakening resolve to support Kyiv and a sense that a peace deal could be imminent have undermined the willingness to take difficult decisions.
“Around the table, the moral imperative is functioning less and less,” said one of the diplomats. “Capitals all agree on tough rhetoric and talk of solidarity, but then it all melts away.”
The latest slate of proposed sanctions contains measures targeting Russian exports and the country’s financial system, alongside a mechanism to keep artificially low the price at which Russia can export crude oil, a system endangered by the various national vetoes.
Athens has refused to agree to the entire package if it does not win approval for transporting Russian liquefied natural gas to third countries, arguing that it would otherwise deal a blow to a prominent Greek shipping billionaire, George Prokopiou.
Prokopiou’s Dynagas company has transported more than 30mn tonnes of LNG from the Arctic Yamal project since the full-scale invasion of Ukraine, according to Kpler, a data and analytics platform.
This would equate to more than $24bn of cargo, according to FT estimates based on price data from Argus Media, a pricing agency. One vessel alone, the Fedor Litke, has carried more than $4bn of cargo.
“Greece is obviously not the only EU government that tries to protect its own interests from sanctions costs, but it’s unusual for a government to lobby on behalf of a single company profiting so handsomely from Russian business,” said a former US sanctions official.
Portugal and Germany have also demanded that a ban on buying Russian fish be deleted, citing the need to support their local fish-processing industries.
Major tourist destinations France and Italy want a ban on issuing EU visas to Russian soldiers who have served in the war to be watered down. And Austria has reiterated a longstanding demand that Russian assets worth €2bn be unfrozen to compensate Raiffeisen Bank for a fine imposed by Moscow.
“It is a major crisis for the whole sanctions approach. If everyone demands derogations and loopholes, then at the end of the process, each package of sanctions is just an empty box,” said the diplomat.
Since two days before Russian President Vladimir Putin’s invasion, the EU has imposed 20 packages of sanctions in a bid to reduce resources for his war machine and pressure him into peace talks.
Some existing measures — such as import bans on Russian fertiliser, steel and diamonds — and a phaseout of Russian hydrocarbon purchases took weeks of wrangling and diplomatic pressure on affected EU states to secure unanimous approval.
But diplomats have said that the scale of refusals by capitals to accept the latest proposals has reached unprecedented levels.
The EU was “close to peak [Russia] sanctions”, said Jacob Kirkegaard, senior fellow at Brussels-based think-tank Bruegel.
“We are at the end of the line here, where people recognise that now . . . in the eyes of member state political leaders, the crown jewels are at risk,” he said. “And we are fundamentally just at the position where national leaders think they can no longer be shamed or bullied or whatever into giving up on these issues, and therefore they are de facto untouchable.”
European companies, including Danish brewery group Carlsberg and Finnish energy group Fortum, suffered billions in losses in the initial months of the war as sanctions were imposed and Russian corporate entities were seized. Countries whose companies bore that impact are increasingly irritated by what they see as allies protecting their corporate interests or demanding solidarity from them.
“There are certain member states who did not end business with Russia in 2022, in 2023,” said a second diplomat. “The uncomfortable truth for those capitals is that now we’re actually going after those industries because those are the big earners still left.”
“This is where the money is . . . so let’s hit them where it hurts,” the diplomat added. “But these [ambassadors] point at each other and are like: ‘Well, we can’t possibly give up our business interest; it’s better that you give up something of yours’.”
Greek government officials argue that any new EU sanctions should impose “a significantly higher cost on Russia” than on Europe’s own economy, and must be “carefully calibrated” to maximise pressure on Moscow while minimising unintended consequences.
Greek diplomats have also argued that banning Dynagas, which has used 11 ships on 144 voyages to and from Russian LNG ports over the past 18 months, will only hand “strategic advantages” to global competitors and allow third-country players to gain market share at the EU’s expense.
Multiple Greek politicians have referred to what they view as overzealous sanctions as “shooting ourselves in the foot”.
Shipping analysts have said that Greek shipping maintains an outsized sway in Athens. In a 2021 documentary on the shipping industry, the Greek shipowner Panos Laskaridis said that “the Greek government does what the Union of Shipowners tells them to do, and in 99 per cent of cases that is a good thing”.
If it cannot trade Russian gas with third countries, Dynagas could be forced to sell its specialised ice-class fleet of LNG carriers, which were designed specifically to ship LNG from Russia’s Yamal plant in the Arctic, when an EU-wide ban on Russian gas comes into force in January next year.
Dynagas said it had “rigorous contractual commitments extending as far as up to 2065” that had been entered into “many years before the current conflict”.
“A blanket prohibition on the transportation of Russian LNG to third countries risks becoming a self-inflicted setback for European maritime leadership, strategic ownership, employment and influence, without achieving its intended geopolitical objectives,” it said.
The delay to the 21st sanctions package and weakening of its measures come as Ukraine puts Russia under intense military pressure through long-range strikes targeting Moscow and key oil refineries. Western officials hope that a united front among Kyiv’s backers will force Putin into peace talks.
But diplomats say that much of the reluctance among some EU states to support tougher measures, even if they might hurt their own economic interests, boils down to whether or not capitals feel that Russia poses a direct threat to them.
Various European governments have in recent weeks warned of a potential Russian hybrid attack on a Nato country, to test the solidarity of the military alliance.
“The unfortunate thing is that the actual debate we’re having here is about threat assessment from Russia,” said a third diplomat.
“[Reluctant countries] say they have a national interest. Sure, that’s fine. But the problem is that [four years ago] for the Nordics or the Baltics, it was worth it because they understood the threat. But today, these other countries think it’s not worth it.”
