European Union ambassadors are set to approve a sixth package of sanctions over Moscow’s invasion of Ukraine, banning most Russian oil imports by year-end and restricting Russia’s ability to ship crude to countries worldwide.

The sanctions would forbid the purchase of crude oil from Russia delivered to member states by sea in six months and refined petroleum products in eight months, according to a draft document seen by Bloomberg.

Oil delivered by pipeline would be temporarily spared after the bloc’s leaders reached a compromise on Monday night, overcoming weeks-long resistance from Hungarian Prime Minister Viktor Orban.

The suite of actions would also see Russia’s biggest bank, Sberbank, cut off the international payments system SWIFT. That measure would come into force 10 days after it has been adopted, according to the draft. The same restriction, due to be discussed by EU ambassadors as part of the whole package on Wednesday afternoon, also targets Credit Bank of Moscow and the Russian Agricultural Bank.

Orban, who turned 59 during the summit, was also granted assurances that Budapest could source alternative supplies should Hungary’s pipeline deliveries be disrupted.

“If the supply of crude oil by pipeline from Russia to a landlocked member state is interrupted for reasons beyond the control of that member state, the import of seaborne crude oil from Russia into that member state should be allowed, by way of an exceptional temporary derogation,” says the document, which is subject to change.



The package includes a ban on insurance related to shipping oil to third countries, which will take effect six months after the formal adoption of the measures, and aims to restrict Moscow’s options to divert its supplies elsewhere in the world.

It would “be prohibited to provide, directly or indirectly, technical assistance, brokering services or financing and financial assistance, related to the transport, including through ship-to-ship transfers, to third countries of crude oil or petroleum products which originate in Russia or which have been exported from Russia,” the draft says.

Dozens more individuals, including Alina Kabaeva, a former Olympic gymnast “closely associated” with President Vladimir Putin, are added to the bloc’s list of sanctions.

Once approved by ambassadors, the final package will need to be formally adopted by their capitals and could change before that happens.

Seaborne supplies account for about two-thirds of Russian oil imports, and once in place, the measure would cost Putin up to US$10 billion a year in lost export revenue, according to Bloomberg calculations. That’s because the ban would force Russia to sell its crude at a discount to Asia, where it’s already changing hands at about US$34 a barrel cheaper than the price of Brent futures.

The losses would be a small share of the US$270 billion Russia’s government is forecasting for energy exports this year.

The prohibition on insurance would be a significant impediment to exports as it would span the vast majority of the global fleet of oil tankers seeking to transport Russian barrels. The EU has been in talks to coordinate the measure with some Group of Seven nations, including the UK, according to people familiar with the matter.



Earlier proposals, however, to ban tankers from shipping oil to third countries were dropped from the EU’s package after Greece opposed the measures.

Sanctions on Sberbank could provide another blow to Russia and the global, raw materials trade. The Russian lender had been expanding its commodity-trade finance business as banks including BNP Paribas and ABN Amro retrenched or pulled out of the sector altogether. Sberbank’s Swiss unit saw its commodity-trade finance business double in volume last year, with money flowing mainly to the petrochemicals, metals, grains and fertilizers sectors.

The bulk of the current oil pipeline deliveries is to Germany and Poland, which have signaled they will wean themselves off Russian supplies this year regardless of any EU action. If both countries follow through, the total effect, along with the seaborne embargo, would be to cut 90 per cent of Russian crude oil sales to the EU by year’s end.

Countries that will continue to receive supplies by pipeline will be prohibited from re-selling crude to other nations from eight months after the packaged is adopted. The Czech Republic will benefit from an additional 10-month exemption, allowing it to buy petroleum products obtained from pipeline oil, mainly diesel.

Some countries will also have a longer transition for the seaborne oil ban. For Bulgaria, a period until end-December 2024 is envisioned, while Croatia could get an exemption for imports of vacuum gas oil, which is used to make products including gasoline and butane, until Dec. 31, 2023 under certain conditions.

The sanctions package also includes restrictions on setting up trusts, providing consulting services to Russian companies and trade in a number of chemicals. A proposal to ban Russians from purchasing real estate in the EU was also abandoned because Cyprus objected.