knowledge 5 August 2025 |

The European Union’s 18th Sanctions Package: Escalating Pressure on Russia’s Energy and Banking Sectors

Key Measures in the 18th Package

Energy Sector Restrictions

The price cap on Russian crude oil exports will be reduced from $60 to $47.60 per barrel, effective from 3 September 2025. The 18th Package incorporates a new automatic and dynamic adjustment mechanism to review and update the price cap every six months to ensure it remains at least 15% below the average market price for Russian crude oil.

The 18th Package also imposes a full transaction ban on the Nord Stream 1 and Nord Stream 2 gas pipelines.

From 21 January 2026 the EU will prohibit the purchase, import, or transfer of petroleum products into the EU if they are produced in third countries using crude oil originating from Russia. Exceptions apply to products from Canada, Norway, Switzerland, the UK and the US. To ensure compliance, refined petroleum imports from other third countries will require documented proof of the crude oil’s origin, with further guidance from the European Commission expected.⁴

An additional 105 vessels associated with Russia’s so-called “shadow fleet” have been added to the EU’s list of restricted vessels that contribute to Russia’s energy revenues, bringing the total to 444.⁵  These vessels are banned from EU ports and from receiving maritime and related services. The scope of maritime enforcement has been expanded to include vessels transporting military equipment and looted Ukrainian grain.

Financial and Banking Sector Restrictions

From 9 August 2025, the ban on providing specialised financial messaging services (e.g. SWIFT) to certain Russian banks will be upgraded to a full transaction ban. This full transaction ban will apply to the 23 Russian banks that were previously subject to messaging restrictions and to an additional 22 banks including Bank Saint Petersburg, Yandex Bank, Metcom Bank, and Bank Zenit.

A similar full transaction ban on the Russian Direct Investment Fund (RDIF) and its affiliates took effect on 20 July 2025. Four Russian entities with significant RDIF investments have already been listed.

The EU is reducing the threshold for imposing sanctions on financial and credit institutions as well as crypto-asset service providers from third countries that undermine sanction measures against Russia, assist Russia’s war of aggression, or are linked to the System for Transfer of Financial Messages (SPFS). SPFS is the Russian alternative to international financial messaging, developed by the Central Bank of Russia to protect Russian banks from the effects of EU sanctions.

The sale, supply, transfer, or export of software used in the banking and financial sector (including online/mobile banking, loan processing, ATMs, point of sale systems, regulatory reporting, and investment banking) to Russian entities is now prohibited, with a wind-down period for pre-existing contracts until 30 September 2025.

Asset Freezes and Military-Industrial Sector Restrictions

The 18th Package introduces new asset freezes and travel bans on 14 individuals and 41 entities, including Russian and international companies managing shadow fleet vessels, traders of Russian crude oil, a major Indian refinery (Nayara Energy, part-owned by Rosneft), and three Chinese companies supplying battlefield goods to Russia.⁶

The EU also imposed tighter export restrictions on 26 new entities (15 Russian, 7 Chinese/Hong Kong, 4 Turkish) to the list of those subject to strict export controls for dual-use and advanced technology items. The list of restricted items has been expanded to include additional chemicals, CNC machines (computer-controlled machines used in manufacturing), and components for missile propellants.⁷

Anti-Circumvention and Enforcement Measures

The 18th Package builds upon existing measures designed to prevent the enforcement of sanctions-related contractual claims brought by designated persons or Russian persons.

The 18th Package introduces important amendments to Article 11 of Council Regulation (EU) No 833/2014.⁸ These changes aim to prohibit the recognition and enforcement of certain arbitral awards, injunctions, judgments, out of court settlements linked to investor‑state claims relating to EU sanctions against Russia, or requests for cooperation in such proceedings. These measures explicitly define such enforcement as contrary to EU public policy. Essentially, the EU will not acknowledge or enforce decisions that undermine its sanctions regime.

The 18th Package also introduces new provisions allowing the EU and its Member States to recover damages and legal costs incurred as a consequence of investor-State dispute settlement proceedings brought in connection with EU sanctions against Russia.

Implications for Businesses

The 18th Package marks a significant escalation in the EU’s strategy, with a strong emphasis on enforcement, and anti-circumvention. Businesses operating in or with Russia, Belarus, or high-risk third countries should:

• Review and update sanctions compliance programs and supply chain due diligence;
• Assess exposure to newly listed entities, sectors, and products;
• Prepare for enhanced documentation requirements, especially regarding the origin of petroleum products; and
• Monitor EU publications for further guidance and legal clarifications.

The EU is expected to continue focusing on enforcement and closing loopholes, with further measures likely if circumvention persists.

Conclusion

The EU’s 18th sanctions package introduces sweeping new restrictions and enforcement tools, reflecting the bloc’s ongoing commitment to pressuring Russia and its supporters. The new measures aim to hit Russia's energy, banking, and military sectors hard, and to ensure accountability for Russia's continued war of aggression against Ukraine. Companies must remain vigilant and proactive in their compliance efforts to navigate the evolving sanctions landscape.

Links to new restrictive measures announced on 18 July 2025

Energy Sector

• Council Regulation 2025/1494 of 18 July 2025 amends Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine (see here)
• Council Decision 2025/1495 of 18 July 2025 adds 105 ships to the list of restricted vessels in Annex XVI of  Decision 2014/512/CFSP (see here)

Military‑Industrial Exports

• Council Regulation (EU) 2025/1494 of 18 July 2025 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine (see here)
• Council Implementing Regulation (EU) 2025/1476 of 18 July 2025 amends Council Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine (see here)

Measures Against Belarus

• Council Regulation (EU) 2025/1472 amending Regulation (EC) No 765/2006 (see here)
• Council Implementing Regulation (EU) 2025/1469 of 18 July amends Council Regulation (EC) No 765/2006 in view of the situation in Belarus and the involvement of Belarus in the Russian aggression against Ukraine (see here)

Official Journal of the European Union

• The new measures introduced by the 18th package are available on the Official Journal of the European Union (see here)
• The Council of the European Union press release on 18 July 2025 (see here)

Also contributed to by Toluwalade Bello