EU, U.K. Approve New Russia Sanctions as Divisions Emerge

Tuesday’s measures—in response to Russia’s invasion of Ukraine—are the latest salvo in what has become the largest, coordinated package of restrictions ever rolled out against a single country in such a short time.

They have locked many Russian banks out of international markets and slashed the ability of Russia’s central bank, which holds more than $600 billion in reserves, to intervene to support the currency and bail out Russian lenders and businesses. Export bans, including on cutting-edge technology, aim to inflict long-term harm on Russia’s economy unless the Kremlin reverses its aggression against Ukraine.

As Tuesday’s packages demonstrate, however, pressing deeper sanctions can become more difficult during each new round. Having surprised the world with the speed and unity of an early burst of sanctions, Washington, Brussels and London have more recently gone at different speeds rolling out potentially more controversial rounds. The U.S., for instance, said it would stop buying Russian oil imports. The U.S. uses much less Russian energy than Europe.

Germany, Italy and others have worked to make sure the EU can continue to import Russian oil and natural gas and have created carve-outs in energy and banking sanctions to enable that. During discussions on Tuesday, German officials, with the backing of Hungary, Italy and others urged to focus on implementing already agreed sanctions, according to diplomats.

The U.K., meanwhile, has banned Russian ships from its waters, a measure the EU has been discussing but hasn’t been able to agree on so far. Within the bloc, Poland has pushed for more complete sanctions against Russian banks but such measures haven’t been agreed upon, diplomats say.

With its new package Tuesday, the EU plans to ban the import of finished steel from Russia, which the bloc says is worth around €3.3 billion, equivalent to $3.6 billion, in lost export revenue for Russia. The EU also intends to ban the rating of Russia and Russian companies by EU credit-ratings firms and the provision of rating services to Russian clients, the bloc said.

That measure will need support from the U.S. if it is to be effective, officials said. Discussions between Brussels and Washington on it are under way.

The list of luxury goods whose export to Russia was banned ranged from expensive cars to musical instruments, clocks and pearls. Most western luxury companies moved out of Russia in advance of the ban so the biggest impact may be that companies won’t be able to reopen until sanctions are lifted, which could be years away. EU officials said they expected Swiss companies, who are outside the EU, to follow suit.

Still, the EU measures don’t go quite as far as originally proposed by European Commission President Ursula von der Leyen last week. After some tense discussions over the past few days, a number of exemptions were made to the measures, including permitting the continued import of a number of materials from Russia, such as aluminum and palladium. EU member states will also have longer to wind down contracts with Russian counterparts.

EU diplomats said some of the tensions over the last few days resulted from the re-emergence of divisions over how fast to push ahead with Russia sanctions. A group of countries led by Poland wants more far-reaching measures, including a block on energy imports, something that has little prospect of garnering EU-wide support in the near-term.

Others, including Germany, want to consolidate the measures already taken, ensure they are properly implemented and be careful about rushing into new sanctions.

Nonetheless, EU diplomats and officials said that the latest sanctions rounds, which include an export ban on luxury goods into Russia that is financially costly for France and Italy, came together in just four days and that differences between member states aren’t blocking important decisions.

For now, European and U.S. unity on the need to keep pressure on Russia is also holding. The White House said on Tuesday that President Biden will join EU leaders in Brussels for their summit next week to discuss Ukraine. He will also attend a meeting of NATO leaders.

“I do suspect that over times, gaps could emerge but I’m not worried about the sanctions coalition falling apart,” said Eddie Fishman, adjunct professor at Columbia University’s School of International and Public Affairs and a former State Department sanctions official.

Mr. Fishman said that Washington would be wise to let the EU decide what to do about gas imports but said the biggest sanctions prize still remaining is a global embargo on Russian oil and an effort to trap Russian oil revenue abroad, as was done with Iranian oil sales.

“I do believe that we will get there,” he said. “It could take a little while.”

The new restrictions on investment in Russia’s energy sector don’t include bans on Russian oil or natural gas imports, two products Europe relies on heavily. Instead, they have agreed to a blanket ban on new investment across the Russian energy sector, including upstream oil, gas and coal projects and on upgrades of things such as refineries. The new sanctions make exceptions for civil nuclear energy, the bloc said.

The sanctions came into effect Tuesday evening.

Mr. Abramovich, one of Russia’s highest profile oligarchs, has already been sanctioned by the U.K., where his planned sale of Chelsea has been ensnared by those restrictions. A representative for Mr. Abramovich hasn’t commented. The oligarch will face an asset freeze and a travel ban across the bloc, diplomats said. Mr. Abramovich is a citizen of EU member Portugal, leaving it up to Portuguese authorities to decide whether he is allowed there.

Mr. Abramovich was one of 50 Russians sanctioned by the EU on Tuesday. Others included well-known television presenters and journalists accused of generating support for the war and senior business executives.

The bloc also banned all transactions with dozens of Russian state-controlled enterprises across Russia’s defense, shipbuilding, scientific research and other industrial sectors.

Governments have powers to temporarily freeze assets of individuals or entities in their jurisdiction, without proving criminality. Owners are typically barred from selling or benefiting from them until sanctions are lifted or successfully contested. Governments typically can’t move to take ownership of the assets, though, except after often-lengthy legal proceedings that would require proof of lawbreaking. The U.K. government, however, is considering laws that would give itself the powers to seize sanctioned assets.

The U.S. said late Monday it would issue new restrictions against individuals it described as leaders in Russia’s defense establishment, including several members of Russia’s Defense Ministry, the commander-in-chief of Russia’s national guard and the head of a Russia’s state-controlled intermediary that Washington says carries out foreign trade with respect to military goods.

In the U.K. on Tuesday, Foreign Secretary Liz Truss added 370 more names to Britain’s sanctions list, bringing the total number of individuals, entities and subsidiaries designated to more than 1,000. The U.K. said the net worth of the 51 oligarchs newly sanctioned had an estimated combined worth of £100 billion, the equivalent of $130 billion.

Newly sanctioned individuals in the U.K. include Mikhail Fridman, the founder of Alfa Bank, Russia’s largest private bank, and his business partners German Khan and Petr Aven. London also hit political figures, including Kremlin spokesman Dmitry Peskov.

Most of the new U.K. sanctions were made under new legislation that allows individuals to be sanctioned under urgent procedures. The individuals sanctioned will have their assets in the U.K. frozen, preventing U.K. citizens and companies from doing business with them. They are also banned from traveling to or from the U.K.

In a move echoed by the EU on Tuesday, the U.K. also moved to sever normal trade links with Russia and Belarus, denying them access to preferential treatment for their exports as it seeks to intensify pressure on Moscow for its invasion of Ukraine. Hundreds of Russian and Belarusian exports, including vodka, iron and ships, will now be subject to an extra 35-percentage-point levy on top of normal tariffs, the British government said.

—Stephen Fidler and Trefor Moss contributed to this article.

Write to Laurence Norman at [email protected]