The EU is diluting key elements of its proposed 21st sanctions package against Russia as internal divisions deepen over how far member states are willing to go to tighten economic pressure on Moscow.

Diplomats have spent recent days trying to salvage a compromise after several governments demanded changes to measures affecting energy, shipping and the Russian oil price cap, warning that the original proposals would inflict disproportionate costs on their own economies.

The most contentious issue is the mechanism governing the floating rate oil price sanctions cap of 15% below market rates for the Urals blend, Russia’s main export product.

Under existing rules, the cap is automatically recalculated every six months. Because Russian crude prices have recovered sharply in recent months, failure to adopt the new sanctions package before the 15 July deadline would automatically raise the cap from around $44.10 per barrel to approximately $58. That comes at a time when the Trump administration’s Memorandum of Understanding (MoU) with Iran has seen Ural prices fall to aroudn $40 – less when discounts are taking into account. In other words, if the adjustment is made there would be no restrictions on all for caarryign Russian oil.

Brussels wants to avoid what is sees as a politically disastrous result. Russia could to sell substantially more oil at higher prices while remaining fully compliant with the sanctions regime. Officials are therefore scrambling to postpone the automatic revision until January while negotiations continue.

According to diplomats, Greece, Cyprus and Malta — whose economies depend heavily on maritime services and shipping — are resisting changes to the price-cap mechanism and have sought to protect the competitiveness of their shipping industries, which continue to dominate global tanker markets.

The dispute threatens to hold up the entire sanctions package. If EU ambassadors fail to reach unanimous agreement before the deadline, the higher cap would take effect automatically, potentially handing Moscow billions of dollars in additional export revenue at a time when it desperately needs a boost thanks to the ballooning budget deficit.

Energy divisions resurface

The broader package has also been softened following pressure from member states that remain heavily exposed to Russian energy supplies.

Slovakia has sought further guarantees that new sanctions will not undermine its energy security or accelerate the EU's separate plan to phase out Russian gas imports by 2027, while Hungary has repeatedly argued that successive sanctions packages have imposed greater costs on Europe than on Russia. Both countries previously used their vetoes as leverage during negotiations over earlier sanctions rounds before eventually withdrawing their objections after receiving concessions.

The latest package is expected to include additional measures targeting Russia's shadow fleet of oil tankers, financial institutions and exports supporting Moscow's military-industrial complex. However, diplomats acknowledge that several of the original proposals have been weakened during negotiations in order to preserve the unanimity required for EU sanctions.