The Regime is Wavering: Russia seeks sanctions relief without making any concessions

Sanctions and diplomatic balance

In mid-March, without making any formal announcements, the US allowed exemptions to the sanctions regime for transactions related to raw material supplies through Russian banks – Sberbank, VTB, Alfa-Bank, and the Bank of Russia – to expire. According to the Central Bank itself, tthe share of dollars and euros in Russian export transactions amounted to 18.6% ($70.8 billion) last year, which is not insignificant. The expiration of these exemptions was presented as a strong leverage tool for the Trump administration against the Kremlin. However, experts were skeptical from the outset about its effectiveness. Atlantic Council analyst Eddie Fishman has suggested that any disruptions would be temporary and that new loopholes would soon be found. By the end of March, there were no signs that the measure had created additional difficulties for Russia in exporting and processing payments. It remains unclear whether Washington genuinely intended to complicate payments (a move that would also impact Russian supplies to Europe, which still cannot fully abandon Russian gas) or merely wanted to signal potential trouble to the Kremlin. In any case, this episode once again highlights Washington’s limited tools for increasing pressure on Russia.

At the same time, the Trump administration's strategy of concessions and ‘stranglehold’ in its negotiations with the Kremlin – along with, likely, the unprofessionalism of the American negotiating team – has led to a gradual erosion of the sanctions regime against Russia. Meanwhile, the experience of the Russian side has only accelerated this process.

At first, the US administration promised Moscow that sanctions would be eased if peace agreements on Ukraine were reached. In early March, Reuters sources revelaed that the White House had instructed officials to develop a set of measures to ease sanctions. On 18 March, during his second conversation with Trump, Vladimir Putin effectively rejected a ceasefire offer and agreed only to discuss a moratorium on strikes against infrastructure and military actions in the Black Sea. Following this, US Special Envoy for the Middle East Steve Witkoff, who plays a key role in negotiations with Russia, stated on X that Washington could begin easing sanctions as soon as a temporary ceasefire agreement is reached. Such a statement risks creating sanctions chaos: a ceasefire agreement could be revoked for various reasons within 30 days, forcing the US to reimpose recently lifted sanctions. Sensing Washington's weakness, Moscow's demands expanded further. After the 24 March negotiations, the Kremlin announced that even a partial ceasefire in the Black Sea would only take effect if sanctions were lifted on Russian fertiliser and food producers, agricultural machinery imports to Russia, and Rosselkhozbank, restoring its access to SWIFT.

In reality, easing restrictions on agricultural exports and fertilisers—which have largely been exempted from sanctions due to their importance for the Global South—is not critical for Russia. Russian agricultural exports are at record highs and are limited only by crop yields (→ Re: Russia: New Oil for The New Patrushev). However, the sanctions ultimatum itself serves multiple purposes for the Kremlin. First, it pressures Washington to continuously 'lower the bar' for lifting sanctions. Second, it drives a wedge between the US and Europe – restoring Rosselkhozbank’s SWIFT access falls under Belgian (i.e., EU) jurisdiction. Lastly, whether by coincidence or design, Moscow’s ultimatum coincided with an investigation revealing that exempted fertiliser producers were involved in supplying raw materials for Russia’s military needs.

Regardless, by the end of March, the sanctions-diplomatic balance has shifted. While the Trump administration either refused or failed to use tougher sanctions as a bargaining chip in talks with Moscow, the Kremlin has managed to make sanctions relief a central demand and increase pressure on the White House. Initially, Washington viewed easing sanctions as a reward for ending the war, then for agreeing to a full ceasefire. Now, Moscow demands it as a condition for a partial, strategically unimportant ceasefire in the Black Sea.

How to shake up the sanctions regime (the Kremlin playbook)

The US president's power to impose or lift sanctions is largely based on the International Emergency Economic Powers Act (IEEPA), which gives the executive branch broad authority to declare a ‘national emergency’. The emergency status related to Ukraine has been in effect for over a decade—Barack Obama introduced it on March 6, 2014, in response to the annexation of Crimea. This status automatically expires after a year unless extended by a special executive order. Donald Trump issued another such decree at the end of February this year, but has the right to revoke it at any time. Even if Congress formally delegates sanctions authority to the president, it is unlikely to intervene – assuming it even wants to. According to Taisa Marcus, an adjunct professor at the University of Illinois College of Law at Urbana-Champaign, Congress would have to prove that the president’s actions are causing actual harm to the US to successfully challenge him.

However, some sanctions were imposed outside of framework laws, notes financial analyst Alexander Kolyandr in an article for Carnegie Politika. To lift them, the US president must prove to Congress that doing so is necessary – such as demonstrating that maintaining sanctions contradicts US interests. These sanctions include the ban on exporting dual-use goods, as well as measures targeting specific companies and individuals. Notably, such restrictions apply to Nord Stream 2, Arctic LNG 1and Arctic LNG 2, as well as Sberbank and Gazprombank.

In reality, however, sanctions are far more fragile and vulnerable than they may seem, especially when they are supported by a limited coalition of countries while others remain neutral. In such cases, they function as a 'one-sided fence.' Additionally, sanctions are a regulatory, non-market restriction that, first, imposes costs on both sides and, second, creates rent-seeking opportunities for those who can bypass them, as economist Alexander Libman reminds us (→ Dynamics of isolation in conditions of fragmentation).

Even the mere prospect of sanctions relief and the weakening of political will for their enforcement triggers market expectations, which Moscow skillfully fuels. After the Trump administration hinted that the easing of sanctions could extend to the energy sector, among others, oil traders have declared their readiness to return to Russia. Meanwhile, amid discussions about reviving Nord Stream 2, lbbyists in Germany and Europe – eager for the return of cheap Russian gas – became more active. Additionally, Bloomberg reported that Novatek is already offering Indian buyers gas supply contracts from Arctic LNG 2, claiming that US sanctions on the project will soon be lifted, causing prices to rise.

Furthermore, in enforcing sanctions that function as a 'one-sided fence' – those supported by only part of Russia’s trade partners – secondary sanctions play a critical role. Over the past two years, the US has been key to ensuring their effectiveness. Notably, sanctions on Russian oil became significantly more effective after the US Treasury’s Office of Foreign Assets Control (OFAC) introduced new secondary measures (→ Re:Russia: The Spectre of Surplus Over The Shadow Fleet). However, these enforcement periods typically lasted no more than three months. Similarly, the mere threat of secondary sanctions restricted dual-use exports, even from China (→ Re:Russia: Beijing-Style Friendship).

In recent months, Washington’s new stance has significantly weakened the threat of secondary sanctions. According to Bloomberg, US officials seeking a deal with Moscow have practically halted participation in several intergovernmental task forces created to coordinate sanctions enforcement. Specifically, these include groups monitoring dual-use goods shipments to Russia and compliance with the oil price cap. Trump also has the authority to remove OFAC from the sanctions enforcement process – an action that would severely undermine their effectiveness.

Finally, some sanctions are informal, particularly those related to the voluntary exit of foreign companies from Russia. The weakening of Washington’s sanctions stance tempts many of these companies, which lost significant market share and investments upon leaving, to return. Moscow actively encourages this process, inviting foreign businesses to return and even making ‘goodwill’ gestures (for example, Putin returned the assets of Ariston by decree).

Moscow is exploiting Trump’s unfounded belief in the possibility of a deal – not only to gain negotiating advantages without making concessions but also to push Washington into making them. Additionally, the Kremlin uses this dynamic to erode the sanctions regime, creating numerous loopholes and mobilising Western lobbyists for its dismantling.

The problem of sanctions sovereignty: what can Europe do?

If the US weakens or completely lifts sanctions pressure on Russia, how will this affect the effectiveness of measures imposed by the EU, the UK, and other coalition members who reject a deal with Putin and remain committed to supporting Ukraine and containing Moscow? Fundamentally, Europe has a much greater interest in maintaining sanctions because easing them would significantly expand Putin’s ability to prepare for the next war – one in which Europe itself could be directly involved. From this perspective, sanctions relief effectively increases Europe’s costs for adequately preparing for a potential military confrontation with Russia.

The short answer to whether Europe can sustain trade restrictions against Russia without US involvement is: no.Currently, Europe lacks not only sufficient military power but also sanctions sovereignty and, crucially, internal political unity.

From a formal perspective, European sanctions are far more important than American ones, Agathe Demare, an expert at the European Council on Foreign Relations (ECFR), rightly points out in an article for Foreign Policy. Before the war, the EU was Russia’s main trading partner, whereas its trade volumes with the US were minimal. Two-thirds of Western companies operating in Russia before 2022 were from the EU, while American businesses played a relatively minor role in the Russian economy. At the same time, US banks served as correspondent banks for Russian financial institutions, facilitating international transactions. Lifting sanctions on several Russian banks and assisting them in opening correspondent accounts on Wall Street could be part of a potential deal between the US and Russia, suggests Alexander Kolyandr.

However, even if European sanctions remain in place, Russia's access to the international financial system will still be severely restricted. Even dollar transactions that do not involve European counterparties often pass through banks in London, Frankfurt, or Dublin on their way to Wall Street, notes The Economist. In addition, Russian banks remain disconnected from SWIFT, the Belgium-based global financial messaging system.

The EU also has leverage over Russian oil exports, as Baltic ports handle about half of its volume. A recent example of this pressure is the confiscation of a tanker from Russia’s shadow fleet by German authorities, as reported by Der Spiegel. The vessel, en route from the port of Ust-Luga to Egypt, lost control and drifted north of the German island of Rügen. The tanker and its cargo – about 100,000 tons of oil – were seized because the vessel had been added to the EU sanctions list in January. According to Der Spiegel sources in the German government, this unusually tough action was meant to signal to Russia that Germany intends to crack down on Russian oil transit through the Baltic Sea in defiance of sanctions.

Today, European leaders and representatives of Brussels maintain that sanctions can only be lifted after the full resolution of the conflict in Ukraine. However, whether they can uphold this stance remains uncertain. Europe currently lacks the necessary mechanisms to independently enforce sanctions, as well as a centralised body to coordinate them, write Vladyslav Vlasiuk at VoxEU and Eriks Selga, an expert at the Centre for European Policy Analysis (CEPA). The position of Special Envoy for Sanctions was created in early 2023 (held by former EU ambassador to the US David O’Sullivan), but it serves only an ambassadorial rather than an executive role. Europe needs to establish an institution similar to the US Office of Foreign Assets Control (OFAC) to oversee sanctions enforcement, develop unified compliance standards, and ensure that all European financial institutions adhere to them. Selga proposes granting such authority to the EU's Anti-Money Laundering and Countering the Financing of Terrorism Authority (AMLA).

Last week, the European Commissioner for Financial Affairs Maria Luis Albuquerque just started working on the idea of creating such a body, according to the terms of the tender published by the European Commission. The document highlights that sanctions enforcement in the EU is currently handled by at least 160 national agencies, making effectiveness close to zero. One of the key challenges for the project will be harmonising enforcement across EU member states, says Sascha Lohmann, an expert at Stiftung Wissenschaft und Politik, in a commentary for Table.Media. In the next phase, national governments will have to unanimously transfer sanctions enforcement and penalty authority to the European Commission, under which the new institution would operate.

Even if Europe swiftly prepares to establish a sanctions enforcement body, it will face a second major challenge: its lack of political unity at the EU level on strategic issues, including a common sanctions policy. Achieving unanimous approval on this matter will be difficult due to opposition from Hungary and Slovakia, both of which openly reject sanctions pressure on Russia.

According to Politico, in January, Hungary only stopped blocking the latest renewal of EU sanctions after US intervention. Without such intervention in the future, Hungary could gain leverage over the EU and expand its opportunistic coalition within the bloc. Previously, Hungary and Slovakia were joined by Greece in opposing additional restrictions on Russia. Since last year, the European Parliament has been discussing whether to invoke Article 7 of the Treaty on European Union against Hungary, which could strip it of voting rights if its actions contradict the Union’s core values. This measure is the most effective tool for preventing blackmail and other 'destructive practices,' writes former Lithuanian Foreign Minister Gabrielius Landsbergis. However, it too is constrained by the EU’s consensus rule – meaning Slovakia, which aligns with Hungary, would also have to support it.

Just as with military support for Ukraine, Europe's ability to pursue an independent sanctions policy is not impossible given its enormous economic influence. However, it is currently hindered by both a lack of institutional preparedness for sovereign action in this area and a shortage of political will, coupled with resistance from pro-Russian forces operating within the EU’s broad veto system.