EU Imposes Additional Sanctions Against Russia and Belarus; EU and UK Agree to Tightening of Russian Oil Price Cap

On 18 July 2025, the Council of the European Union (the “Council”) adopted its 18^th package of economic sanctions against Russia, following extensive negotiations among the EU Member States. This latest package introduces new asset-freezing sanctions designations, and a wide range of trade restrictions targeting key sectors of the Russian economy, including significant new measures relating to the Russian energy and financial services sectors.

Among other new measures, the EU has implemented amendments to its implementation of the so-called G7 “price cap” regime, through which services concerning Russian oil and oil products are subject to sanctions restrictions, implemented by the EU and G7 nations, where the services relate to oil and oil products sold at above set price thresholds. The new EU measures lower – for purposes of the EU sanctions – the “price cap” applicable to Russian-origin oil from USD 60 to USD 47.6 per barrel, effective 3 September 2025. The UK Government has announced that it will introduce equivalent changes to its implementation of the G7 “price cap” regime.

Separately, on 18 July 2025 the EU passed a new set of sanctions relating to Belarus, including various measures intended to bring the EU-Belarus sanctions more closely in line with similar Russia-related sanctions.

Asset-freezing Designations

Council Implementing Regulation (EU) 2025/1476 newly designates 14 individuals and 41 entities for EU asset-freezing sanctions. The individuals in question include persons in a range of business and public roles, including several non-Russian persons who the EU has designated as a consequence of alleged efforts on their part to circumvent EU sanctions measures.

The newly designated entities include various Russian companies in the defense, energy, transportation, electronics, and industrial materials sectors. As with regard to the individual designations, the new entity designations also include various non-Russian entities that are alleged to have circumvented EU sanctions, and/or participated in transactions concerning Russian-origin crude oil. Those designations include entities established in China, Hong Kong, the UAE and India. The list also notably includes the Indian company Nayara Energy Limited, which owns and operates a major oil refinery in Vadinar, India, and is 49% owned by sanctioned Russian energy company Rosneft.

As with other EU asset-freezing designations, persons subject to EU sanctions jurisdiction are broadly restricted from dealing, directly or indirectly, with the newly-listed persons and entities, or with any entity that designated parties own a 50% or greater interest in or otherwise control.

New EU Sectoral Restrictions

Council Regulation (EU) 2025/1494 (the “Regulation”) amends the principal EU-Russia trade sanctions regulation, Council Regulation (EU) No 833/2014 (“Regulation 833”), to impose various new trade sanctions in relation to Russia and expand existing ones. The measures include the following, among other changes:

Export/Supply Controls and Associated Services Restrictions

The Regulation includes new items in the following annexes to Regulation 833:

• Annex VII has been updated to subject further advanced technology items to trade controls under Article 2a of Regulation 833, including certain types of chemicals, machine tools, additive manufacturing equipment, and associated items.
• Annex XXIII, which lists “goods which could contribute to the enhancement of Russian industrial capacities” that are subject to trade restrictions in Article 3k of Regulation 833, also has been amended to include new items. The newly-designated items cover various types of machinery, such as gas turbines, chemicals, and certain metals and plastics.
• Annex XXXIX, which lists business software products subject to restrictions under Article 5n of Regulation 833, has been amended to capture certain software used in the financial sector, including software used in online and mobile banking, loan management, automated teller machines (ATM) and point of sale (POS) integration, regulatory reporting and investment banking.

The Regulation includes limited wind-down provisions, exemptions, and licensing provisions regarding certain of the foregoing items.

Consistent with pre-existing restrictions in Articles 2a, 3k and 5n, EU persons are prohibited from directly or indirectly selling, supplying, transferring or exporting the foregoing items to Russia, or to any other jurisdiction if intended for use in Russia. Those prohibitions are accompanied by independent restrictions on the provision of any services, or extending intellectual property rights or trade secrets, in relation to restricted goods if intended for use in Russia.   

The Regulation also introduces a new paragraph 1aa to Article 2a of Regulation 833, requiring a prior authorization to export items listed in Annex VII to any third country if the exporter has been informed by its competent Member State authority that the items are or may be intended, in whole or in part, for end use in Russia or by a Russian person or entity.

Finally, the Regulation also adds new entities to Annex IV of Regulation 833, which designated entities for enhanced export controls regarding dual-use and Annex VII items.

Energy Related Measures

Russian Oil Import Restrictions

The Regulation amends Article 3m – which restricts the import into the EU of Russian oil or petroleum products – to remove an existing exemption that had allowed for imports into the Czech Republic.

Third Country Petroleum Products Import Ban

The Regulation establishing a new restriction, set out in Article 3ma of Regulation 833, on the import, purchase, or transfer of non-Russian petroleum products obtained from Russian-origin crude oil. Article 3ma also prohibits the provision of associated services – including technical assistance, brokering, financing, insurance and reinsurance – in connection with such imports, purchases, or transfers. These new restrictions come into effect on 21 January 2026.

Importers will be required to provide evidence of the origin of the crude oil used in refining the imported petroleum product at the moment of importation, unless the product is imported from a “partner country“ listed in Annex LI, which currently lists Canada, Norway, the United Kingdom, the United States, and Switzerland. Recitals to the Regulation indicate that the European Commission will issue further guidance on the nature and form of the documentation required.

Article 3ma also establishes a presumption of non-Russian origin for petroleum products imported from third countries that were net exporters of crude oil in the previous calendar year – unless a competent authority has reasonable grounds to believe otherwise.

Nord Stream and Nord Stream 2

The Regulation introduces a new prohibition, in Article 5f, against engaging in transactions concerning the completion, operation, maintenance, or use of the Nord Stream and Nord Stream 2 natural gas pipelines, or associated financing of those transactions. The Nord Stream and Nord Stream 2 pipelines – portions of which were destroyed in September 2022 – were built to facilitate the export of natural gas from Russia to the EU, but have been out of use since August 2022. 

Article 5f includes a limited exemption in connection with urgent actions that are strictly necessary to prevent or mitigate serious risks to health, safety, the environment, maritime navigation, or for actions in response to natural disasters. The Regulation also includes provisions allowing Member State regulators to issue case-by-case licenses, in limited circumstances, to authorize activities restricted under Article 5f.

Amendments to Russian LNG Restrictions

The Regulation introduces a minor amendment to Article 3u of Regulation 833, allowing for case-by-case licensing for transactions relating to Russian liquified natural gas (LNG) to the extent the transactions in question are necessary to ensure energy supplies.

Arms Embargo

The Regulation introduces various changes to Article 4 of Regulation 833, which imposes restrictions on services related to military goods. Of note, in addition to a pre-existing prohibition on providing technical assistance, brokering services, and financing to Russia for items listed on the EU Common Military List (“CML”), Article 4 now also broadly prohibits the provision of any services related to “military activities” to parties in Russia or for use in Russia.

The Regulation also introduces a prohibition against the sale, supply, transfer, or export of CML items to any person or entity in Russia or for use in Russia. Previously, that prohibition was imposed only in an underlying Council Decision, thus requiring EU member state legislative implementation.

Finally, the Regulation introduces a prohibition against the import, purchase, or transport into the EU of CML items originating in or exported from Russia.

Transaction Bans

Russian Direct Investment Fund

The Regulation introduces a new Article 5ag, which significantly broadens existing EU sanctions related to Russia’s sovereign wealth fund, Russian Direct Investment Fund (“RDIF”). While Regulation 833 already prohibited participation in projects co-financed by the RDIF, the new provision goes further by banning all transactions—directly or indirectly—with:

• RDIF itself;
• any entity owned or controlled by the RDIF;
• non-EU entities in which the RDIF has made a significant investment listed in Annex XLIX (which includes Vizor Labs, Kama (Atom) JSC, Bit River LLC, and Labadvance LLC);
• non-EU entities that provide investment or other financial services to the RDIF or its affiliates listed in Annex L (which currently does not list any entities); and
• any person or entity acting on behalf of or at the direction of the above.

Transaction Ban With Regards to Entities That “Frustrate” Regulation 833 Prohibitions

For the first time, the EU has introduced designations under Article 5ad of Regulation 833, which prohibited EU operators from engaging in any transactions with designated non-Russia credit or financial institutions that are involved in activities frustrating the purpose of the EU Russia sanctions. The Regulation designates Heihe Rural Commercial Bank Co. Ltd. and Heihe Rural Commercial Bank Co. Ltd., both based in China, under those sanctions. Effective 9 August 2025, EU persons will be prohibited from conducting any transactions with those entities, subject to limited exemptions set out in the regulations.

The new Regulation also includes technical amendments to broaden the scope of entities that are eligible for designation, under Article 5ad, for undertaking efforts to “frustrate” the purposes of the prohibitions in Regulation 833. Through those amendments, eligible entities include not only banks and crypto asset services providers – as per the original iteration of Regulation 5ad – but any category of entity involved in “frustrating” Regulation 833 prohibitions.

Transaction Ban With Regards to Russian Financial Institutions Subject to Specialized Financial Messaging Services Restrictions

The Regulation significantly expands restrictions under Article 5h of Regulation 833. That provision previously was limited to restricting the provision, by Russian financial institutions designated in Annex XIV, of specialised financial messaging services. Article 5h now restricts any transactions with entities listed in Annex XIV, together with majority-owned Russian subsidiaries thereof, subject to limited exemptions and licensing provisions set out in Article 5h. 

The foregoing change applies immediately to banks already listed in Annex XIV, and will apply as of 9 August 2025 to a number of newly designated Russian banks (including, of particular note, large Russian banks such as Bank Saint Petersburg, Yandex Bank, and Bank Zenit).

Transaction Bank With Regard to Users of the Russian System for Transfer of Financial Messages (SPFS)

The Regulation includes technical amendments to broaden the authority for the EU to designate non-Russian entities that make use of the Russian SPFS system.

Transaction Ban With Regards to Russian-Government Linked Entities

The Regulation introduces a new exemption from the Article 5aa prohibition on transactions with certain Russian-government linked entities. Through those amendments, Article 5aa prohibitions do not apply to entities established in the EU that act on behalf or at the direction of the listed Russian entity, provided that either: (i) a competent member state authority has imposed a public trusteeship or similar firewall measure; (ii) or such a firewall measure has been authorized by a competent member state authority to ensure the entity’s continued operation and compliance with EU sanctions.

New Protections Relating to Russian Legal Claims

The Regulation strengthens protections against legal claims related to the implementation of the EU Russia sanctions. Article 11 of Regulation 833 already prohibited the satisfaction of claims made by Russian persons or entities, or parties designated for sanctions under EU-Russia sanctions measures, where the performance of a contract has been affected by EU sanctions. The amended Article 11 augments those prohibitions through a new clause specifically restricting the recognition, giving effect to, or enforcement of any injunction, order, relief or judgment, issued in connection with EU-Russia sanctions measures, pursuant to claims in non-EU investor-State dispute settlement proceedings.

The Regulation also introduces a new provision empowering EU Member States – and the EU itself where applicable – to seek recovery of direct or indirect damages incurred as a result of investor-State dispute settlement proceedings related to EU Russia sanctions measures.

Port Ban & Maritime Service Restrictions

The EU has expanded the list of vessels (Annex XLII) subject to the port ban and related service prohibitions set out in Article 3s of Regulation 833.

The new EU Regulation also introduces changes to Article 3n, which governs the EU implementation of the G7 price cap mechansim concerning services in relation to Russian-origin oil and oil products. Article 3n prohibits EU persons from trading, brokering, or transporting Russian-origin crude oil and certain Russian-origin petroleum products to third countries, and from providing associated services—such as technical assistance, brokering, financing, and insurance—in connection with such activities. Those prohibitions apply unless the oil or petroleum products were purchased at or below a set price cap, as listed in Annex XXVIII of the Regulation 833.

The new Regulation introduces the following key changes to the EU’s implementation of the G7 price cap:

• A new price cap of USD 47.6 per barrel is established for Russian crude oil (CN 2709), replacing the current cap of USD 60 per barrel. The new cap will take effect on 3 September 2025.
• A transitional exemption will apply until 18 October 2025, allowing the continued execution of contracts that (i) were concluded before 20 July 2025, and (ii) were compliant with the prior USD 60 cap at the time of conclusion.
• The price cap for petroleum products (CN 2710) remains unchanged at this stage.

The Regulation also updates the methodology used to determine future price cap adjustments. The European Commission will now calculate the cap every six months based on the average market price of Russian crude over a 22-week period, applying a 15% discount. No adjustment will be made if the new calculated price differs from the existing cap by 5% or less.

The UK Government has announced that it will implement corresponding changes to its enforcement of the G7 price cap. It remains uncertain, however, whether other G7 nations that participate in the Russian oil price cap regime – including Canada, Japan, and the United States – will follow suit.

On 18 July 2025, the Council of the European Union imposed additional sanctions measures on Belarus in response to Belarus’s support of the Russian full-scale invasion of Ukraine. Council Regulation (EU) 2025/1472 expands upon pre-existing Belarus sanctions established in Council Regulation (EC) No 765/2006 (“Regulation 765”). Most of the new measures are broadly similar to – and in some respects substantively identical to – the new EU-Russia sanctions. The new Belarus sanctions include the following measures, of particular note:

Export/supply Controls

The new measures add additional items to the following Annexes to Regulation 765. These additions largely correspond with changes made to the export Annexes in Regulation 833 outlined above:

• Annex Va, which lists “goods and technology which might contribute to Belarus’s military and technological enhancement, or the development of the defense and security sector”;
• Annex Va, which lists “goods and technology which might contribute to Belarus’s military and technological enhancement, or the development of the defense and security sector”;
• Annex XIX, which list goods subject to Belarus transit restrictions.

Moreover, similar to the measures outlined above with regards to Article 2a of Regulation 833, the new Belarus sanctions include amendments to Article 1f of Regulation 765, granting EU Member State authorities the power to require an export authorization for shipments of Annex VA items to third countries if there is a reason to believe that the items are intended for end use in Belarus or by Belarusian parties.

Other Sectoral Measures

• Transaction Ban: The EU has imposed a transaction ban on certain Belarusian financial institutions, mirroring restrictions introduced to Article 5h of Regulation 833. The banks in question are listed in Annex XV to Regulation 765. As with the Russia-related measures, limited exemptions apply, including for pre-existing contractual arrangements.
• Arms Embargo: The new measures formally incorporate the EU Belarus arms embargo into Regulation 765.
• Protections Relating to Belarusian Legal Claims: Similar to the Russia measures outlined above, the Regulation introduces new measures aimed at protecting EU Member States from retaliatory legal action brought by or on behalf of Belarusian parties.

New Asset Freezing Designations

In addition, Council Implementing Regulation (EU) 2025/1469 designates additional Belarusian entities to the EU asset-freezing list. The newly designated parties include companies operating in Belarusian’s defence and military-industrial sectors.

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We continue to closely monitor developments concerning the U.S., UK, and EU sanctions against Russia, and will issue further updates in the event of material developments. In the meantime, we would be happy to address any questions you may have.

Covington’s International Trade Controls team—which includes lawyers in the firm’s offices in the United States, London, and Frankfurt—regularly advises clients across business sectors, and is well-placed to provide support in connection with the evolving Russia and Belarus sanctions and export controls. Our trade controls lawyers also work regularly with Covington's Global Public Policy team—consisting of over 120 former diplomats and policymakers in the United States, Europe, the Middle East, Latin America, Africa, and Asia—many of whom have had substantial government experience in sanctions and export controls matters, and who regularly advise our clients on emerging sanctions policy matters and related engagements with government stakeholders. Moreover, as the crisis arising from Russia’s invasion of Ukraine continues to unfold, Covington is exceptionally well-positioned to assist clients in navigating their most complex challenges, drawing on the multidisciplinary capabilities of additional practices in areas such as international arbitration and disputes, cybersecurity, anti-money laundering, insurance, and corporate restructuring.

If you have any questions concerning the material discussed in this client alert, please contact the members of our International Trade Controls or International Dispute Resolution practice.