G² Dispatches: Hormuz and the Shadow Fleet: A Stress Test for European Sanctions
Key Notes
Background: Since Russia's 2022 invasion of Ukraine, the EU has systematically reduced reliance on Russian fossil fuels — cutting oil and coal imports significantly. However, Russian LNG still accounts for 13% of EU gas imports in 2025, with European-connected firms facilitating over 70% of Yamal gas trade, worth €7.2 billion annually.
EU Sanctions & Ukraine Policy: The EU's 20th sanctions package targets Russian LNG trade, banning short-term spot purchases this year and long-term contracts by January 2027. However, deep contractual entanglements with European firms, ambiguous enforcement mandates, and active circumvention strategies by companies like TotalEnergies undermine the sanctions' effectiveness in cutting Russian war revenue.
The Hormuz Factor: A Window for Russia The closure of the Strait of Hormuz has driven global LNG prices sharply higher, making EU sanctions increasingly costly for European consumers and businesses. This energy price crisis creates political pressure to soften the sanctions regime, potentially handing Russia a strategic reprieve precisely when economic isolation was intended to peak.
Development
Since Russia’s full-scale invasion of Ukraine in February 2022, the EU has reduced dependence on Russian fossil fuels. In May 2022, the European Council placed sanctions on crude oil, while coal imports have fallen drastically. Gas however, used for heating and electricity generation, has been harder to remove from the continent’s energy mix, with Russian LNG still making up 13% of all gas imports in 2025, according to the European Council.
In January 2026, 23 out of 25 cargoes from Russian gas company Novatek’s facility on the Yamal peninsula went to Europe, according to Urgewald, with six ships unloading in Zeebrugge, Belgium.
As short-term spot-buying of Russian gas will be banned by the EU later this year and long-term contracts banned in January 2027; sanctions will effectively end the weekly voyages of Russia’s LNG carrying Arctic Arc7 fleet. In addition, the 20th sanctions package, proposed by the Commission this month, includes a ban on the provision of maintenance and other services for Russian-linked LNG tankers by the end of 2026.
The majority of the LNG transport vessels are owned or operated, not by Russian entities, but by two companies with significant European connections: the United Kingdom-based Seapeak Maritime Glasgow, and Greece’s Dynagas. Together, the two firms facilitated over 70%, or 7.2 billion Euros, of the European gas trade from Yamal in 2025.
However, the European Commission’s Sanctions Unit were unclear when speaking to campaigners on the topic of whether it would pursue blanket sanctions against all Arc7 vessels that would stop the ships from trading Russian gas along regional trade routes.
The EU sanctions may prohibit maritime services providers such as Fluxys, which runs the LNG terminal in Zeebrugge in Belgium, from working with Russian-linked entities. The company is bound by a 20-year contract worth €50 million per year with Yamal to provide services for LNG. According to Fluxys’ spokesperson, Tim De Vil, current sanctions don't provide a legal basis for breaking the company’s service contract with Yamal.
France-based TotalEnergies also has an economic relationship with Yamal — with its significance reflected by Putin naming the first Arc7’s tanker after the company’s former CEO, Christophe de Margerie. Today, TotalEnergies has a 20% stake in the operation and its parent company Novatek. TotalEnergies current CEO, Patrick Pouyanne, has stated his intention to divert LNG cargo through Turkey or Asia, managing to abide by the EU sanctions while continuing TotalEnergies role in propping up the Russian LNG market. This suggests that European corporate exposure to Yamal may relocate along new trade routes rather than unwind in line with sanctions timelines.
Analysis
The effectiveness of European sanctions in preventing European money flow to Russia remains to be evaluated. European companies have remained active players in the export of Russian LNG despite 19 prior sanctions packages, and signal little concern that these sanctions will disrupt their operations in the region. This is notable given that the Russian government profits directly from the Yamal project, through a 10% stake owned by state energy giant Gazprom. Meanwhile, despite global advances in satellite technology, global advances in satellite technology enabling better tracking of Russian-sourced LNG, location spoofing and similar methods of geolocation disruption continue to produce falsified logs, adding to the difficulty of sanctions enforcement. These factors together suggest that Russian profits from Yamal, estimated at 700 million Euros annually, are likely to continue flowing, helping sustain a war that has cost Europe an estimated 177.5 billion Euros as of December, 2025.
The European Commission might need to maneuver between imposing economic penalties on Russia as punishment for its actions in Ukraine and its gas dependency. Russian interests are embedded in European economic and energy security, and undoing those ties without incurring legal penalty or resource shortages could be a difficult challenge for European regulators.
Forecast
European regulators will very likely find themselves navigating competing pressures simultaneously: a Russian security threat, a business community economically intertwined with Russian interests, and a consumer base reliant on Russian gas for basic needs.
Moreover, as a result of the closure of the Strait of Hormuz, and the corresponding rise in LNG costs globally, it is likely that the EU sanctions package is more punitive to European citizens than it would otherwise be, further raising already spiking energy costs throughout the Continent. If this were to be the effect the EU could face additional political pressure from an agitated citizenry, in addition to the likely political pressure from those companies benefitting from the Russian gas trade, to reverse course on this, and other, sanctions targeted at Russia.
The duration of the Strait of Hormuz closure and the recovery timeline for Gulf state production capacity will be central variables in determining whether EU sanctions against Russian LNG remain politically viable. A prolonged closure will sustain elevated global gas prices, deepening the cost burden on European consumers and compounding the political pressure on regulators already navigating competing economic interests.
Due to these competing pressures, sanctions may be expected to gradually unwind economic entanglement, rather than mandate full and rapid divestment. It is also somewhat likely that the EU looks to supplement Russian LNG by turning to American, now that the Qatari suppliers are unavailable.
It is likely that the EU adopts narrow scope and targeted sanctions against specific organizations and infrastructure known to have links to Russia rather than blanket actions. In this scenario, it is fairly likely that Russia continues to work to circumvent regulatory efforts and keep Yamal, and other similar projects, operational through the use of complex corporate bureaucracy, shell companies, and offshore ship registration.The prevalence of location spoofing to create falsified location data is likely to lead regulators toward new Artificial Intelligence powered forensic or digital identification technologies as a method of detection. Another alternative is Russia diverting LNG stocks away from the EU and toward its Asian partners. This option remains unlikely however, due to the existing contracts and partnerships with EU firms.
The firms themselves are very likely to look to clarify compliance in EU courts, and argue for statutory interpretations that are more permissive, to allow them to wind down the aforementioned contracts on their own time.
Finally, Western technology companies are likely to feel the increase in energy prices due to the energy-dependent nature of their recent AI product offerings. It is somewhat likely that technology companies without a direct stake in the Yamal LNG trade look for similar legal clarification simply to understand their own energy input costs.
What to Monitor
The following developments are likely to serve as early indicators of how these pressures resolve
Developments in the Persian Gulf: Any signs of escalation or de-escalation in the region and their immediate reflection in energy markets. A rapid resolution would relieve price pressure and restore political appetite for firm sanctions enforcement; a prolonged crisis would do the opposite.
EU Posture on Russia Sanctions: Statements, delays, or notable silences from the European Commission regarding the sanctions timeline will signal whether the political will to maintain pressure on Russia is holding. Softening language or procedural delays should be read as indicators of backsliding.
Russian Opportunism: Moscow is well-positioned to exploit the current energy crisis. Indicators to watch include increased voyages by Russia's shadow fleet, rising Yamal production volumes, and any diplomatic pressure, direct or indirect, on Ukraine to reopen previously closed pipeline routes and transit corridors, which would further entrench Russian gas dependency at a moment when European leverage is weakest.
