The European Union has introduced sweeping new sanctions to clamp down on the indirect import of Russian oil products, aiming to block refined fuel originating from Russian crude from entering EU markets via third countries like India and Turkey. The legislation, announced on July 20, targets a long-standing ‘sanctions loophole’ that has allowed Russian oil to reach European consumers despite bans on direct imports.

Under current sanctions, direct purchases of Russian crude oil are prohibited. Refined products manufactured in other nations using Russian-origin crude have continued to flow into the EU, often through major refineries in India and Turkish ports. This practice has come under intense scrutiny, with campaigners and analysts warning that it undermines the sanctions regime and finances Russia’s war in Ukraine.

Starting January 21 next year, EU importers must provide verifiable documentation proving that refined fuels were not produced from Russian crude. If such proof is lacking or indicates likely Russian origin, banks will be barred from financing those trades. While the new rules exempt imports from allied countries such as Canada, Norway, Switzerland, the UK, and the U.S., they are expected to impact major re-exporters of Russian oil-based fuels.

The Center for Research on Energy and Clean Air (CREA) has identified Indian refineries in Jamnagar, Vadinar, and Mangalore, along with Turkish ports, as key transit points for Russian crude entering Europe in refined form. In 2023, the European Commission acknowledged these flows contradicted the spirit of the sanctions, but this is the first time the issue is being addressed through legislation.

“This is one of the strongest sanctions packages yet,” said Isaac Levi, CREA’s lead for Europe-Russia policy. “Closing the refining loophole finally cuts off a major financial stream supporting the Kremlin.”

The EU has also taken direct action against companies involved in this trade. India-based Nayara Energy, operator of the Vadinar refinery, 49% owned by Russian state oil giant Rosneft, has been sanctioned for refining large volumes of Russian crude. According to the EU, the facility is a ‘substantial source of revenue’ for the Kremlin. Following the announcement, oil tanker Talara abandoned plans to load fuel from Nayara and turned away from the port, as reported by Bloomberg.

While the UK has aligned with the EU by lowering its Russian oil price cap to $47.60 per barrel, down from $60, other G7 nations have yet to follow. Levi warned that ‘serious loopholes remain’ unless countries like the U.S., Canada, and Australia implement similar restrictions.

Further measures in the EU’s latest sanctions package include:

• Adding 105 vessels to its list of sanctioned entities, targeting Russia’s so-called ‘shadow fleet’ used to circumvent sanctions.
• Sanctioning Intershipping Services LLC, a UAE-based operator of international ship registries, for flagging vessels engaged in high-risk Russian oil transport.
• Prohibiting transactions with foreign financial institutions that enable Russian trade through systems like SPFS, Russia’s alternative to SWIFT.

CREA data suggests that vessels sanctioned by the EU experience an average 34% drop in monthly Russian oil volumes unloaded. These new restrictions are expected to significantly tighten the enforcement of existing sanctions and disrupt Russia’s ability to redirect crude through third-party refineries and ships.

With these moves, the EU is intensifying efforts to shut down remaining avenues for Russian oil to reach global markets and limit revenue streams that could support Moscow’s military operations in Ukraine.

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