Impact of EU sanctions in a hypothetical scenario of US sanctions easing

Introduction

Since February 2022, the European Union, the United States, and other countries have imposed extensive sanctions on Russia, making it the most sanctioned country globally. These measures aim to exert economic and political pressure on the Russian government.

In the event of a lasting ceasefire in Ukraine, the US government is reportedly currently considering easing certain sanctions, particularly those targeting Russian oligarchs and financial institutions, regardless of whether there is a comprehensive peace agreement.

In contrast, while some individual sanctions have been lifted through court decisions there are no indications of a broader easing or lifting of EU sanctions in the event of a cease fire. Instead, the 18th sanctions package was adopted on 19 July 2025, and a 19th package is already in preparation.

This raises the question: how would new investments in Russia, following a potential easing of US sanctions, be treated under EU sanctions law?

Impact of EU sanctions

Even if US sanctions were lifted or eased, EU sanctions would remain fully applicable.

Scope of application

The EU sanctions generally apply within the territory of the EU, including its airspace. They also apply on board any aircraft or vessel under the jurisdiction of an EU member state. Furthermore, they extend to any natural person, whether inside or outside the EU, who is a national of a member state. Legal persons, entities, or bodies incorporated or constituted under the law of an EU member state are also subject to these sanctions, regardless of their location. Finally, any legal person, entity, or body conducting business wholly or partly within the EU falls within the scope of EU sanctions.

If an EU nexus exists, any ongoing operations or new investments in Russia must comply with EU regulations.

Involvement of EU persons

An EU nexus is established if an EU citizen, resident, or company is involved. In such cases, project planning must include ringfencing of EU persons – excluding them from any actions that facilitate restricted dealings, including negotiating, arranging, assisting, promoting, instructing, approving, referring or forwarding opportunities.

Even if ringfencing is feasible and no other EU nexus exists, multinational banks and other third-country entities may still insist on full EU sanctions compliance. Although EU law does not impose secondary sanctions like US law, many institutions voluntarily adhere to EU sanctions and may refuse involvement in non-compliant transactions.

Asset freezes and transaction bans

While broad investment bans apply only to specific sectors (e.g., energy, mining, quarrying), EU sanctions prohibit direct and indirect dealings with designated asset freeze targets. Currently, nearly 2,000 individuals and more than 600 entities fall under these restrictions. Furthermore, many large Russian companies and banks are subject to transaction bans, effectively prohibiting business with Russian state-owned enterprises and financial institutions.

Given the opaque ownership and control structures of Russian entities and the limited availability of reliable information, it is often challenging to ascertain whether a potential business partner is owned or controlled by a sanctioned party. A comprehensive KYC check, aligned with EU regulatory guidance, is essential. In many cases, uncertainty will remain, requiring a risk-based decision on whether to proceed.

Controlled goods and services

Even if a project does not violate asset freeze restrictions or transaction bans, additional restrictions may apply. Particularly relevant restrictions include EU export bans on dual-use goods or items with military or technological utility. There are also EU import bans on goods that generate significant revenue for Russia. Additionally, EU sanctions prohibit the provision of software and business services to Russian companies.

Using a Russian subsidiary does not bypass these restrictions. EU companies are obligated to undertake best efforts to ensure that their non-EU subsidiaries do not undermine EU sanctions. Failure to do so may result in liability for the EU parent company.

Many goods and services subject to EU export restrictions are unavailable within the Russian market. Before expanding operations or investing in Russia following a potential easing of US sanctions, it must be assessed whether the project can proceed without involving controlled goods or services from the EU.

Russian countermeasures against EU companies

Even if EU and other sanctions hurdles are overcome, Russian countermeasures must be considered. Unlike the US or EU, Russia does not maintain comprehensive lists of designated persons or controlled goods. Instead, its countermeasures aim to obstruct Western sanctions and mitigate domestic economic impact.

For this purpose, Federal Law 127-FZ “On measures (counter-measures) in response to unfriendly actions of the United States [...]” of 4 June 2018 distinguishes between “friendly” and “unfriendly” states. The latter includes the US, all EU member states, and other sanctioning countries. Since 2022, entities from these states have faced increasing restrictions, complicating economic activity in Russia.

There is also a risk of expropriation. Assets held by companies from “unfriendly” states may be placed under external administration by Presidential Decree No. 302 (dated 25 April 2023), pressuring owners to sell below market value to state-approved buyers. Notable examples include Danone and Carlsberg.

If US sanctions were eased, the US might be removed from the “unfriendly” list, lifting restrictions on US companies. However, EU companies would likely continue to face these countermeasures. A risk assessment considering potential expropriation and the protection offered by bilateral investment treaties is therefore essential.

Conclusion and recommendations

Even if US sanctions were lifted or eased, Russia would remain a highly regulated and high-risk market for EU companies. Where an EU nexus exists, new investments would only be possible under strict compliance with EU regulations. A strategic review of project structures – especially to avoid an EU nexus – is indispensable.

Key questions to address include:

• Applicability of EU sanctions: Do EU sanctions apply to the proposed transaction?
• Ringfencing of EU persons: Can the EU nexus be excluded through ringfencing?
• Russian counterparty status: Can it be confirmed that the counterparty is not subject to an EU asset freeze or transaction ban?
• Controlled goods and services: Can the project proceed without goods or services subject to EU export/import bans?
• Russian countermeasures: Have risks from Russian countermeasures, including potential expropriation, been adequately assessed?