In brief
- The UK has significantly tightened its Russia sanctions regime, expanding trade, energy and transport restrictions, including a ban on third-country processed Russian oil products and maritime transportation of Russian LNG. At the same time, it has issued targeted general licences to ease the pressure on energy prices caused by war in Iran.
- The EU has not followed the temporary easing of energy-related sanctions as a matter of policy. Its recent packages continue to treat Russian oil and gas as a circumvention and enforcement issue, with a particular focus on shadow fleet vessels, maritime services, tanker sales and non-Russian operators involved in the trade.
- If a final US-Iran deal is reached, energy, trading, shipping and financial services firms should expect further EU and UK restrictions on Russian oil and gas alongside an easing of Iran sanctions. For now, parties must ensure they are monitoring indirect sanctions exposure across their broader networks and, if relying on one of the UK's general licences, keep a close eye on revisions and expiry dates.
The significant disruption to global energy supplies caused by the war in Iran has once more brought western sanctions against Russia's oil and gas sector into focus. The need to mitigate economic fall-out from the conflict has led to a softening of some sanctions on Russian energy products, and brought into relief increasing differences in emphasis between US sanctions policies on the one hand, and the EU and UK on the other.
The terms of the Memorandum of Understanding (MOU) between Iran and the US included a commitment to the "terminat[ion] of all types of sanctions" against Iran. Although, at the time of writing, President Trump has described the MOU as "over" in light of renewed attacks in the Strait of Hormuz, negotiations over peace terms with Iran are continuing. If a final peace deal is reached and sanctions against Iran are lifted, it seems likely that the UK and EU's divergence from the US will deepen – with consequences for the energy sector and beyond. Sanctions experts at Mishcon de Reya in London and August Debouzy in Paris provide an update on the current UK and EU positions and look at what could lie ahead if a final peace deal is reached.
Signs of divergence before the Iran war
Since 2022, international sanctions on Russia have been wide-ranging and extensive, targeting strategic sectors of Russia's economy, including banking, energy and defence. In the early stages of the Ukraine war, the US sanctions policies under President Biden were closely aligned with those of the UK and EU. A key example of this coordination was the price cap for Russian crude oil and refined oil products agreed between the G7, EU and partners in late 2022 and early 2023. This prohibited service providers (shipping companies, insurers, brokers) from the UK and coalition countries from facilitating the transport or trade of Russian oil, unless it was traded or sold at or below the agreed cap.
However, since President Trump took office in January 2025, there has been increasing divergence between US sanctions on Russia, and those imposed by the EU and UK. For example, the UK and EU have lowered the oil price cap on several occasions, most recently on 31 January 2026, to USD44.10 per barrel, whereas the US continues to apply the original cap of USD60 per barrel – a near 27 per cent difference.
The UK and EU have also maintained a notably stronger focus on Russia's "shadow fleet": a fleet of ageing, often poorly maintained tankers used to transport Russian oil, typically under flags of countries with looser regulatory standards, in order to unlawfully circumvent the price cap. The UK and EU have each designated hundreds of shadow fleet vessels, as well as entities and individuals implicated in facilitating the shadow fleet, targeting entities established in India, China, Hong Kong and the UAE. By contrast, the US has not introduced any new designations in connection with the Russian shadow fleet since the end of the Biden Administration, although designations for Venezuelan and Iranian shadow fleets have continued.
Current sanctions on the Russian oil and gas sector – what has changed since the Iran war began?
UK
In order to ease pressure on the global energy supply caused by the war in Iran, the UK has issued two narrow General Trade Licences, permitting (i) diesel and jet fuel processed in third countries from Russian crude oil to be imported into the UK and (ii) the supply of liquified natural gas (LNG) from the Sakhalin-2 LNG terminal or Yamal LNG terminal to a third country or between two third countries under contracts not exceeding one year. Both licences expire on 1 January 2027 and can be revoked at any time earlier, although the Government has indicated it will endeavour to give four months' notice if the first licence is revoked. If oil prices stabilise following a final peace deal, the licences may well be withdrawn before the expiry date.
However, it is clear that these limited exceptions do not represent a wider softening of the UK's stance towards Russia. The day after the licences were issued, the UK Government introduced numerous amendments to the existing suite of Russia sanctions, widening the scope of export prohibitions across a range of goods (including those related to emerging technologies such as AI), and introducing significant new restrictions on the Russian energy sector.
These restrictions expand the existing prohibition on the import, acquisition, supply and delivery of Russian-origin oil and oil products into the UK by now also prohibiting the import into the UK of any oil products that have been processed in a third country from crude oil originating in Russia, irrespective of the number of intermediate countries or processing stages involved. The prohibition also captures co-mingled products, where oil products derived from Russian crude are blended with non-Russian oil and oil products in a third country prior to import.
Alongside the tightening of rules on oil products, the new measures introduce a ban on the maritime transportation of Russian LNG, together with related ancillary services. The ban closely aligns with measures adopted by the EU and applies to any person who supplies or delivers such LNG by vessel, and any person who owns, controls, charters, or operates a vessel carrying the LNG or who is involved in its transfer (subject to limited exceptions in the general licence).
Enforcement of sanctions in the context of the shadow fleet has also stepped up. The UK's second set of criminal charges for breaches of the Russia sanctions were brought against John Ormerod in April 2026, for allegedly transferring funds in violation of sanctions laws. Few details of the transactions have been released, but Mr Ormerod was previously designated by the UK for acquiring tankers that became part of Russia's shadow fleet. Earlier this month, in an unprecedented operation, British forces also boarded and detained a Russian-linked oil tanker in the English Channel. One of the crew was arrested on suspicion of sanctions offences.
EU
The EU has, if anything, moved in the opposite direction from the targeted flexibility adopted by the UK. Rather than issuing general licences to ease energy sector pressure, the EU's recent measures treat Russian oil and gas primarily as a circumvention and enforcement problem. Any flexibility that has emerged is narrow, technical and reversible – a concession to energy security arithmetic, not a strategic softening on Russia. This is clear from the successive sanctions packages adopted since 2025. The 18th package lowered the crude oil price cap from USD 60 to USD 47.60 and introduced an automatic dynamic adjustment mechanism, first applied in January 2026, resulting in a new cap of USD 44.10 per barrel from 1 February 2026. The 19th package then tightened the focus on Russian energy, third-country banks, crypto providers and the shadow fleet, including additional vessel listings, a ban on reinsuring shadow fleet vessels, measures against third-country operators and transaction bans affecting banks and oil traders outside Russia.
The 20th package continues the same logic, with a stronger anti-circumvention architecture. It includes dedicated due diligence obligations for EU sellers of vessels, a mandatory “no Russia” clause in relevant sale contracts, measures targeting ports linked to the shadow fleet and oil price cap circumvention, and the legal basis for a future prohibition on the transport of Russian oil and petroleum products in coordination with the G7 and the Price Cap Coalition. It also extends pressure on financial services and crypto, including measures against Russian crypto-asset service providers and third-country financial institutions used to frustrate sanctions.
The proposed 21st package follows this trajectory. The Commission has proposed pausing the automatic adjustment of the oil price cap until January in order to preserve pressure on Russian revenues despite market volatility. It also intends to add 30 further vessels to the shadow fleet list and, for the first time, targets vessels that assist the shadow fleet, including by providing bunkering or other services. The same proposal would expand transaction bans to additional Russian banks and to banks, crypto firms, platforms and oil traders in third countries alleged to have serviced sanctioned Russian persons or circumvented EU measures.
The emphasis has therefore moved well beyond whether a direct counterparty is Russian or listed. The EU is now looking at the full chain: the origin of the cargo, the vessel's flag history, its ownership and control structure, its insurance arrangements, manipulation of vessels' automatic identification systems (AIS), ship-to-ship transfers, financing flows, trading intermediaries and the ultimate destination of the product. This makes compliance more fact-sensitive and more dynamic: an operation that appears permissible at the outset may become high-risk if the vessel changes flag, the cargo is blended or re-routed mid-voyage, a new intermediary is introduced, or fresh guidance or listings are adopted before performance is complete. For energy majors, commodity traders and their financing and insurance counterparties, conformity with the rules as they stand today is necessary, but no longer sufficient. Increasingly, what will be tested is the quality of the process – the red-flag analysis, the risk-based due diligence, the contractual protections, the screening, the escalation and the documented decision – not merely the result.
The shift from sanctions against persons and goods towards sanctions against networks, routes and services is reflected in the EU's measures on maritime services and tanker sales. EU port access restrictions already capture vessels suspected of engaging in prohibited ship-to-ship transfers, manipulating or switching off AIS, or otherwise supporting the transport of Russian oil in breach of the price cap. The 20th package further strengthens this by imposing due diligence obligations around tanker sales to third-country buyers, requiring EU sellers to obtain contractual guarantees regarding end-use and to document their assessment of the risk that a vessel could subsequently be deployed in the Russian oil trade. For shipowners, insurers, brokers, financiers and traders, due diligence can no longer be a purely declarative exercise.
The French authorities' recent seizures of suspected Russian shadow fleet vessels illustrates this more interventionist phase of enforcement. Even though one vessel has ultimately been released, the operational consequences of detention, investigation, delay, insurance scrutiny and reputational exposure can be severe.
What lies ahead?
As recent events show, peace negotiations are fraught and could still fall apart if tensions continue to escalate over the Strait of Hormuz. However, if the US does achieve a final deal which includes the lifting of all sanctions (including UN Security Council Resolutions) against Iran as promised under the terms of the MOU, the EU and UK are likely to come under significant diplomatic pressure to ease their Iran sanctions too.
Easing Iran sanctions and restoring trade through the Strait of Hormuz on a more permanent basis will also enable the EU and the UK to redouble their focus on limiting Russia's oil and gas revenue – a foreign policy objective that seems unlikely to change if Andy Burnham, who has been a vocal supporter of Ukraine, becomes the UK's next Prime Minister. Should a final deal be reached with Iran, we can expect to see a wind down of the UK's recently introduced general licences and a further crackdown on the processing and transport of Russian-origin oil and gas via third countries, as the EU and UK continue their push to close evasion routes. This is likely to be accompanied by a further hardening of the EU's network-based approach – extending designations further up and down the value chain, and increasing scrutiny of the financial, insurance and logistics infrastructure that enables Russian oil and gas to reach global markets.
Bringing an end to war in Iran may also see a renewed focus on Russia by President Trump. He has suggested that the US's own general licences for Russian oil could be withdrawn once a final deal is reached with Iran – although there is no suggestion yet that it would see a return to greater US alignment on the shadow fleet or oil price cap, so the divergent emphasis in the UK, EU and US regimes seems set to remain for now.
While negotiations over the deal continue, parties in the energy sector, as well as other affected sectors such as commodity trading, shipping and financial services, should ensure they are considering sanctions risk beyond direct connections to Russia and Iran. The EU and UK's increasing focus on non-Russian actors – particularly in Turkey, China, the UAE and Azerbaijan – means that exposure can arise well beyond the direct counterparty. Any party relying on existing UK general licences for Russian and Iranian oil and gas should monitor these carefully, as they are likely to be directly affected by the progress of a deal with Iran, whether it succeeds or fails. More broadly, as the EU's regime continues its shift towards sanctions against networks, routes and services, the quality of the compliance process itself – the screening, the escalation, the documented decision – will be tested as much as the outcome.