The Middle East Crisis Is Testing Europe’s Resolve on Sanctions against Russia

Reports that the European Union (EU) is weighing a freeze on its Russian oil price cap as the Middle East crisis drives up energy costs expose Europe’s heavy dependence on fuel imports from the Persian Gulf and point to an emerging dynamic whereby, if the conflict persists into late 2026 or beyond, pressure to soften restrictions on Russian energy imports could also increase.

The EU bloc is considering a temporary freeze on its price cap mechanism for Russian oil exports as the conflict in the Middle East continues to disrupt global energy markets and push crude prices higher, according to people familiar with the discussions cited by Bloomberg in its recent report.

The debate comes as Brussels prepares its next review of its floating rate price cap mechanism, which was redesigned last year to automatically adjust every six months to keep the cap at 15% below the average market price of Russia’s Urals crude. The current cap stands at US$ 44.10 per barrel and is due to be reassessed later this summer.

Under the existing system, European companies are prohibited from providing services such as shipping, insurance, and transportation for Russian oil sold above the established threshold. The measure was designed to curb Moscow’s energy revenues while allowing crude supplies to continue flowing to global markets.

However, the sharp rise in global oil prices linked to the Iran conflict and disruptions around the Strait of Hormuz has complicated those calculations. Officials involved in the discussions said the next review could otherwise lift the cap to at least $65 per barrel, exceeding the original Group of Seven (G7) ceiling of $60 per barrel introduced in December 2022. ‘

Other options under consideration include suspending the automatic adjustment mechanism until the end of the year or limiting any increase to $60 per barrel, in line with the original G7 threshold.

The deliberations coincide with warnings from major European airlines that disruptions linked to the closure and ongoing instability around the Strait of Hormuz could lead to jet fuel shortages across Europe’s aviation sector. 

Ryanair has flagged the possibility of operational disruptions linked to fuel supply issues, while Lufthansa expects jet fuel markets to remain tight and prices elevated for the rest of the year.

While carriers have managed to ease immediate supply concerns by securing fuel from alternative markets, expanding imports from the United States and West Africa, and relying on hedging arrangements, jet fuel costs have continued to climb, raising the prospect of higher ticket prices, reduced flight capacity, and prolonged market uncertainty.

The cause of this emerging jet fuel insecurity in Europe is structural, as the Persian Gulf refineries typically supply 25% to 40% of the continent’s jet fuel, and therefore one should expect that pressure to ease sanctions on Russian energy imports will continue to increase if the conflict in the Middle East extends into late 2026 and beyond.

A latest example of this is Britain, wherein the government has eased parts of its sanctions regime on Russian energy imports by allowing the purchase of jet fuel and diesel refined from Russian crude in third countries such as India and Turkey, so as to shield its consumers and industries from surging energy costs linked to the conflict in Iran and disruption around the Strait of Hormuz.

The measure, introduced through a new trade license that took effect on May 20th and is subject to periodic review, permits such imports for an indefinite period.

In addition to that, the British government also issued a separate temporary license valid until January 1st, 2027, allowing the maritime transport, financing, and brokering of Russian liquefied natural gas originating from the Sakhalin-2 and Yamal projects.

Overall, the deliberations about the price cap on Russian oil imports form part of broader efforts by the EU to finalize its 21st sanctions package against Russia since its 2022 invasion of Ukraine.

The bloc’s latest sanctions package aims to further reduce Russian energy income, constrain its financial sector and restrict supplies reaching its military-industrial base.

The proposed sanctions are expected to cover more banks, oil traders, refineries, and cryptocurrency operators allegedly helping Russia evade current restrictions. Around 20 more ships connected to Russia’s shadow fleet may also be targeted, potentially including ships used to transport liquefied natural gas as well.

Other measures under consideration include expanded export controls on critical minerals, metals and technology used in Russia’s aerospace and defense industries, as well as restrictions on companies in China, India, Turkey and Central Asia accused of facilitating the supply of goods covered by existing sanctions.

EU officials aim to formally present the measures in early June. The proposed sanctions package would require unanimous approval from all 27 EU member states. Several countries remain concerned about the measures that could potentially exacerbate energy market instability amid the continuing crisis in the Middle East.

Tanmay Kadam is a geopolitical observer based in India. He has experience working as a Defence and International Affairs journalist for EurAsian Times. He can be contacted at tanmaykadam700@gmail.com.