On June 23, the European Union adopted another (11th successive) package of anti-Russian sanctions. Brussels is said to have been working on it virtually since the beginning of calendar spring.
The European Council website explains that the package is aimed to strengthen the existing restrictions and prevent their circumvention. "By tackling sanctions circumvention, we will maximize pressure on Russia by depriving it further of the resources it so desperately needs," chief European diplomat Josep Borrel said.
Provisions of the 11th package affect 87 entities allegedly supporting Russia’s defense industry. Also, another 100 individuals have been added to the sanctions list. A block of restrictions against the energy sector is spelled out separately, including oil transportation bans along the northern thread of the Druzhba oil pipeline (to Poland and Germany), and those on Russian tankers calling in the ports/locks of Europe if suspected of ship-to-ship oil transfer.
Thus, the targeted vessels are those suspected by cognizant authorities of a European country of violating the import bans for Russian crude and petrochemicals to the EU that came into force on December 5, 2022 and February 5, 2023, respectively. Those are third country-meant raw stuff purchased at prices exceeding the established price caps ($60 per barrel for oil; $45 or $100 per barrel for petrochemicals, depending on substance classification). Cognizant authorities should also ban port entry unless the carrier notifies of any ship-to-ship operation taking place in the exclusive economic zone of an EU member state, or within 12 nautical miles from its coastline at least 48 hours before. The port/lock entry ban will also be introduced if a tanker carrying oil/ petrochemicals turns off transponders to conceal its location, or distorts instrumental data.
The northern thread situation is rather comical — it hasn’t long been used, with Germany and Poland having waived it earlier. So, this part of sanctions is a mere formality, even though the EU’s legal space has become wider, which seems essential to its bureaucracy.
The southern Druzhba thread running via Ukraine to the Czech Republic, Slovakia and Hungary, has remained beyond sanctions, just like Russian LNG. And yet, some states of the Euro-camp have sought to outlaw Russian pipeline oil and LNG as part of the June package.
It is true that Druzhba pumps Kazakh oil, and the EU happily "accepts" it, which will keep being the case. Moreover, the 11th package stipulates that Brussels ease certain export restrictions against Russia to ensure further maintenance of the Caspian Pipeline Consortium (CPC). The EC website press release reads that energy moves provide for "insertions of strict and very targeted derogations to the existing export bans to enable the maintenance of the CPC (Caspian Pipeline Consortium) pipeline which transports Kazakh oil to the EU through Russia."
A Eurostat report of June 19 notes that March 2023 saw a decrease in Russian imports of oil and petrochemicals to the EU to 1.4 million tons. The figure is 90% lower than the average monthly volume in 2019 to 2022, which amounted to 15.2 million tons. Moscow, as you know, is eminently responding to Brussels’ challenges with an accelerated energy exports pivot. Even Western agencies keep permanently “trumpeting” Russia’s remarkable progress in oil shipments.
The EU's effort to reset the import of Russian energy carriers harms the issuer itself. European refiners switch to Russian oil alternatives and disrupt the existing delivery channels, generating prodigious costs. Daniel Obajtek, CEO of Poland’s PKN Orlen, illustrated initiatives by the European bureaucracy as self-destructive in a May interview with the Financial Times (FT). He complained that replacing Russian crude costs his company a daily $27 million. It does not take a mathematician to calculate that its monthly losses account for some $800 million. Such costs may well result in bankruptcy or proactivity of European business in preventing the collapse of local refinery operations, raising the issue of at least partially restoring energy cooperation with Russia. But this is not observed yet.
Meanwhile, Eurostat has revised the seasonally adjusted GDP of the euro area for the first quarter 2023 to -0.1%, same as the quarter before in Q4 2022, thereby meeting the definition of a technical recession defined as a GDP drop during at least two successive quarters. European Commission spokesperson confirmed the fact of recession, though futile to this date.
