The European Commission has published proposals for a 19th sanctions package against Russia that would tighten curbs on energy trade and payments, with new measures aimed at oil refineries, oil traders and petrochemical companies in third countries, including China and India, Vedomosti reported on September 19, citing a statement by European Commission President Ursula von der Leyen.

“Our sanctions bite. They have a visible impact on Russia’s public finances and economic growth. The European Union must reinforce these efforts collectively with its partners until peace is achieved,” EU foreign policy chief and former Estonian Prime Minister Kaja Kallas said in a statement.

“Any source of income for the Kremlin to continue its aggression is a target. Today we propose a full transaction ban on Russian banks and financial institutions, including those operating in third countries. We also propose adding large economic operators involved in the circumvention of sanctions, revenue generation and support for the Russian military industry, as well as the Russian credit card system and fast payments system,” Kallas continued.

Kallas outlined the main points of the package including:

• The phase-out of Russian gas imports slated for 2028 will be brought forward by a year to January 1, 2027.·          A complete ban on transactions with Russian oil companies will be adopted. The remaining exemptions on Rosneft and Gazprom Neft will be removed.
• Sanctions against oil companies and refineries in third countries (India, China) are proposed.
• The European Commission will reduce the price cap on Russian oil from $60 to $47.6 per barrel.
• Von der Leyen said that Russia’s €170bn cash pile in Euroclear will be used to provide Reparation Loans, but that the details will be released later.
• The EU will impose restrictive measures against the Russian payment system Mir and strengthen efforts to combat sanctions evasion. The restrictions will also affect cryptocurrency platforms, including a ban on cryptocurrency transactions.
• Restrictions will be imposed on foreign banks associated with Russian alternative payment systems. Transactions with organizations in special economic zones will be restricted.
• The EU will tighten export controls for companies from Russia, India and China , as well as introducing a ban on the export of certain chemicals, ores, metal components and salts.
• New sanctions will target 45 Russian and foreign companies and 118 vessels of the "shadow fleet." In total, this list includes more than 560 vessels.

“These new sanctions will also squeeze Russia’s access to technologies including AI and geospatial data, as well as critical resources that feed weapons production. This includes those received from foreign suppliers including China and India,” Kallas said.

Von der Leyen also highlighted the sanctions on energy that have been key to the new package in a separate statement.

“Russia's war economy is sustained by revenues from fossil fuels. We want to cut these revenues. So we are banning imports of Russian LNG into European markets. It is time to turn off the tap. We are prepared for this. We have been saving energy, diversifying supplies and investing in low-carbon sources of energy like never before. Today, these efforts pay off,” von der Leyen said.

“We are now going after those who fuel Russia's war by purchasing oil in breach of the sanctions. We target refineries, oil traders, petrochemical companies in third countries, including China. In three years, Russia's oil revenues in Europe have gone down by 90%. We are now turning that page for good,” von der Leyen added.

Europe has come under pressure from US President Donald Trump, who has demanded Europe stop buying Russian oil and gas in a phone call following the EU Paris summit on September 4. Europe has successfully reduced direct imports of oil from Russia, but continues to import significant amounts of refined products made from Russian crude via India and China. The acceleration of ending LNG imports is a significant change as currently the EU remains Russia’s biggest customer for gas imports.

There is no mention in the nineteenth package of ending Russian piped oil and gas deliveries to Hungary and Slovenia, which remain heavily dependent on Russian supplies and threaten to veto the sanctions package if “no alternatives“ were presented to replace the Russian supplies.

To get the bill through the EC plans to unfreeze around €550mn in subsidies for Hungary in order to overcome Budapest's veto when approving the nineteenth package of sanctions, the Financial Times newspaper reports, citing sources.

In 2022, the EU froze about €22bn of EU cohesion funds intended for Hungary due to Viktor Orban’s government violating certain provisions of EU legislation, concerning judicial reform in Hungary, harsh migration policies, and pressure on certain universities in the country. Some of the funds were unfrozen in an earlier deal, but large volumes of funding still remain unavailable to Budapest.

The details of von der Leyen and Kallas’ references to China and India remain to be seen. Trump was demanding that the EU put secondary sanctions on both counties, including 100% tariffs, something the EC is extremely reluctant to do as it remains much more heavily dependent on Chinese imports than the US. In early comments Von der Leyen ruled out using secondary sanctions as the “EU does not use trade as a political weapon,” she said.

Von der Leyen also said that the EC has decided to go ahead with the Reparation Loans idea: “In parallel, as I announced last week, we are working on a new solution to finance Ukraine's defence efforts based on the immobilised Russian assets. We must be very clear: This is Russia's war, and the perpetrator must pay for it. With the cash balances associated with these Russian assets, we can provide Ukraine with a Reparations Loan. The assets themselves will not be touched. And the risk will have to be carried collectively. Ukraine will only pay back the loan once Russia pays reparations. We will come forward with a proposal soon.

Earlier this week, the Financial Times reported that about €170bn of the €194bn of Russian assets at Euroclear have already matured and now sit as cash balances on its books. The profits this cash generates – about €3-€4bn a year – has already been tapped to secure a €50bn G7 loan for Ukraine that is almost all disbursed. However, the Reparation Loans will use the €170bn cash to issue zero-coupon Eurobonds issued by the coalition of the willing countries willing to participate and given to Ukraine in a scheme that dodges outright confiscation of Russia’s cash.

However, as bne IntelliNews reported, this scheme carries significant legal risks and will almost certainly spark litigation by Russia. In addition, presidential spokesman Dmitry Peskov said that Russia will take “appropriate action” if the scheme goes ahead, which is widely interpreted to mean the Kremlin will seize the some €250bn of privately owned Western assets that have been trapped inside Russia after the war began.

The details of the scheme appear not to have been finalised. Earlier von der Leyen said there is an alternative proposal to establish a special purpose vehicle (SPV) to manage the funding arrangements, potentially enabling non-EU partners to take part.

Media outlets have also reported that the new package would include restrictions on issuing Schengen visas to Russians. The package presented by the European Commission does not include such a measure, Vedomosti reported.