The EU has removed Russian billionaires Alisher Usmanov and Mikhail Fridman from its sanctions blacklist after France and Luxembourg vetoed the six-month renewal of the oligarchs sanctions list if their names were not removed.

In an unusually acrimonious negotiation over keeping the 2,600 names on the list, EU diplomats were forced to strike an 11^th hour baring to ensure sanctions were not lifted on all the oligarchs. In a compromise the tenure of the sanctions was increased to 36 months from six for those that remain listed.

EU ambassadors on September 22 agreed to delist the two businessmen while extending sanctions on the rest for for three years, replacing the six-month renewal cycle that has repeatedly given individual member states an opportunity to threaten a veto. The agreement was formally approved later the same day through the EU’s written procedure. Latvia, the final holdout, abstained rather than block the package. EU sanctions decisions require unanimity among the bloc’s 27 members.

The compromise ends an increasingly fraught dispute after France unexpectedly demanded earlier this month that Usmanov, a Russian-Uzbek metals and mining magnate, be removed from the blacklist on national security grounds. Luxembourg subsequently sought the removal of Fridman, who brought a “Pandora’s box” arbitration claim worth about $16bn against the country that legal experts say he was likely to win.

The French intervention was reportedly tied to an unusual diplomatic negotiation with Azerbaijan over French nationals in prison in the country.

Three European diplomats told Reuters that Paris had privately complained that Baku was using Usmanov to “blackmail” France over two imprisoned French citizens. Reportedly Uzbekistan was also lobbying France to remove sanctions on Usmanov who left Russia after the war in Ukraine began and is now a resident of Tashkent.

Azerbaijan has rejected that it played any role in the saga. President Ilham Aliyev has previously lobbied European governments for Usmanov to be removed from the blacklist, although the precise nature of his interest in the businessman has not been publicly explained.

The two French nationals have been identified as Martin Ryan and Anass Derraz. Ryan was sentenced in March to 10 years in prison on espionage charges. France has challenged the handling of his case, while Azerbaijan says the proceedings complied with its law and international obligations. Derraz, an executive at French water group Saur, was initially sentenced to 12 years in prison; an Azerbaijani appeals court subsequently reduced his sentence by three years.

Relations between Paris and Baku have deteriorated sharply since Azerbaijan retook Nagorno-Karabakh in September 2023. France has a large Armenian diaspora population and accused Azerbaijan of arbitrarily detaining French nationals and conducting interference and disinformation operations directed at French interests, allegations Baku disputes.

Usmanov, 73, was placed under EU sanctions on February 28 2022, four days after Russia launched its full-scale invasion of Ukraine. The EU’s most recent listing described him as a leading businessman with interests across iron ore, steel, telecommunications and technology through his USM holding company, including Metalloinvest and MegaFon.

The Council also alleged that he had close ties to President Vladimir Putin and benefited from his relationship with senior Russian decision makers. Those allegations began with a tweet by Swedish analyst Anders Aslund who called Usmanov “Putin’s favorite oligarch, claim he has since retracted and deleted the tweet after being challenged to provide evidence by Usmanov’s lawyers.

Usmanov has consistently rejected allegations underpinning the sanctions and repeatedly challenged his designation in European courts. In a letter sent to the European Commission (EC) leaders, seen by IntelliNews, he called for sanctions on him to be removed after almost all of the press reports used in his sanctions designation have now been retracted or deleted.

Fridman, 62, the co-founder of Alfa Group and an investor in LetterOne, was sanctioned on the same day. The EU subsequently said his business interests in Russia made him a leading businessman operating in sectors that generated substantial revenue for the Russian state. Fridman has disputed the grounds for his designation.

His legal challenge has already produced a significant victory. In April 2024 the EU General Court annulled sanctions imposed on Fridman and his business partner Petr Aven covering the period between February 2022 and March 2023, ruling that the Council had not sufficiently substantiated the grounds used to list them. The judgment did not automatically invalidate later sanctions imposed on new or revised grounds, and Fridman remained on the blacklist until the September 21 decision.

Luxembourg’s push to remove Fridman came as a verdict in the $16bn arbitration claim against the state approaches its conclusion. Fridman claimed that Luxembourg had broken a Soviet-era investment agreement that guarantees non-appropriate of privately-owned assets that is still in force. EU diplomats said Luxembourg was concerned that maintaining sanctions on Fridman while agreeing to remove Usmanov could weaken its position in the dispute.

The delistings provoked a furious response from Kyiv and other Ukrainian allies. Several eastern European governments on the frontline with Russia argued that sanctions relief should follow changes in the conduct of those targeted rather than unrelated bilateral negotiations.

“The decision to delist Usmanov and Fridman is shameful and unjustifiable. Moscow is celebrating,” Ukrainian foreign minister Andrii Sybiha said, calling on individual EU states to consider national restrictions against the businessmen. Ukrainian President Volodymyr Zelenskiy said earlier that this is the time to tighten sanctions, not begin the process of lifting them.

Latvia did its best to block the deal from going through until the final hours, as the deadline clock ticked down. Prime Minister Andris Kulbergs said Riga would examine the possibility of imposing national sanctions even though it would abstain at EU level. France also agreed to begin talks with Latvia over participation in a French nuclear-deterrence initiative, according to diplomats.

The dispute nevertheless produced a substantial change to the architecture of the EU sanctions regime. Individual listings imposed over actions threatening Ukraine’s territorial integrity had historically required renewal every six months. Under Tuesday’s compromise, almost 3,000 remaining listings will instead remain in force for three years, reducing the opportunities for individual governments to hold up the entire package.

The measures include asset freezes, travel restrictions and prohibitions on EU individuals and companies making funds or other economic resources available to sanctioned persons and entities.

The episode has nonetheless exposed the political vulnerability inherent in the EU’s requirement for unanimity on sanctions, with national governments able to use the periodic renewal process to pursue bilateral objectives that are only indirectly related to Russia or the war in Ukraine.