Why the EU faces an uphill battle to pass its 18th Russia sanctions package

Good morning. News to start: Blackstone plans to invest “at least $500bn” across Europe in the coming decade in a bet that economic reforms will revive growth, the investment group’s co-founder Stephen Schwarzman told the Financial Times.

Today, I explain the hurdles for the EU’s new Russia sanctions package proposed yesterday, and Denmark’s climate minister tells our correspondent that the green agenda needs to be more cheery.

Crude truths

Brussels has finally tabled its “hard-biting” 18th sanctions package against Russia. Now comes the hard bit.

Context: Since Russia invaded Ukraine in February 2022 the EU has implemented 17 packages of sanctions in response, in a bid to throttle Moscow’s military-industrial complex and punish those supporting the war.

The package unveiled yesterday includes a ban on using the Nord Stream gas pipelines connecting Russia and Germany, a move to reduce the G7-imposed oil price cap to $45 from $60, and a ban on imports of refined products made in third countries using Russian crude.

Taken together, the package is perhaps the most powerful since those imposed in the early months of the war. But adoption requires support from all the EU’s 27 countries and, most likely, US President Donald Trump.

Hungary and Slovakia have both said they oppose new sanctions measures. Other capitals say they have heard that before, and Budapest and Bratislava eventually roll over and agree, and so have no reason to think that won’t happen again.

Trump is another matter. EU officials were keen to propose the new measures before the upcoming G7 summit that begins on Sunday to build momentum and convince the White House that there’s merit in putting more pressure on Russian President Vladimir Putin to force him to engage with peace talks. Reducing global oil prices — a perennial desire for any US leader — would be an added incentive.

Trump’s Treasury secretary Scott Bessent was sceptical of the oil price move when it was discussed at a G7 finance ministerial last month. But officials point out that only one man makes the final call, and it’s unclear exactly where Trump stands on the Putin pressure question.

The Nord Stream measures should pass muster with EU capitals, many of which condemned Germany for building the pipelines in the first place.

The refined products proposal, however, could raise opposition, and not just from countries such as India and Turkey that still buy Russian crude and sell its derivatives to the EU.

Those EU buyers would need to find alternatives, likely at a cost. It is also fiendishly tricky to identify which refined products were made from what original crude, making implementation tough — even if the measure gets unanimous support.

Chart du jour: PIIGS might fly

Italian, Spanish and Greek sovereign bonds have mounted a “relentless” rally that has narrowed the gap with Germany’s benchmark borrowing costs to nearly the smallest in more than a decade.

Positive messaging

Citizens must be sold a better vision of a sunny green future if the EU is to reach its climate goals, Denmark’s climate minister Lars Aagaard tells Alice Hancock.

Context: Denmark takes over the rotating presidency of the EU from Poland on July 1. One day later, the European Commission is expected to propose legislation setting out how the EU will cut emissions by 90 per cent by 2040 compared to 1990 levels.

Aagaard, who will chair negotiations on the 2040 target among member states, said that he faced an “intense process” to get all EU countries on board given the challenging circumstances: a trade war with the US, competition from China and stubbornly high energy prices.

The target must be signed off by October in order for the EU to present a subsidiary 2035 goal to the UN ahead of the COP climate conference in Brazil in November — a “limited time window”, Aagaard acknowledged.

Member states have been agitating for greater flexibility in the 2040 target, compared to the EU’s intermediate goal to cut emissions by 55 per cent by 2030, which was first proposed in 2019. Many fear that more strict climate regulations will prompt a backlash and fuel right-wing narratives about EU over-reach.

Denmark, typically among the most ambitious member states on climate matters, has long supported a 90 per cent goal for 2040.

Aagaard said he “truly respected” that the transition process was “difficult for citizens” faced with choices over what car to buy or what heating system to choose.

It was incumbent on politicians to “make the design of the future as clear as possible,” he said. “The change can be difficult but the place we will be in is better than it is now.”

What to watch today

1. Polish parliament holds confidence vote on Prime Minister Donald Tusk’s government.

2. German Chancellor Friedrich Merz hosts Danish Prime Minister Mette Frederiksen in Berlin.

3. EU officials speak at German Marshall Fund Brussels forum.

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