What Europe Can Do If Trump Drops Russia Sanctions

As U.S. President Donald Trump doubles down on plans to ink a deal with Russian President Vladimir Putin over Ukraine, the risk of a U.S. U-turn on Russia sanctions appears high. Such a scenario would leave it up to Europe to continue with the sanctions on its own—an unprecedented situation that would beg the question of whether unilateral European measures would have much bite on Moscow. The answer is yes, especially if European sanctions focus on trade.

The power of Western sanctions lies in the ability of Washington and Europe to leverage the prominence of the U.S. dollar, as well as the dominance of the trans-Atlantic economy in trade, investment, and technology. In the case of Russia, simple numbers show that Europe has more leverage than the United States. Since early 2022, Russia has ditched the U.S. dollar in a bid to shield itself from sanctions, with the effect that Russian firms now use the greenback for less than 5 percent of cross-border trade. What’s more, Russia’s trade ties to the United States have always been minimal; in 2021, the last full year before the full-blown invasion of Ukraine, the United States absorbed a mere 3.6 percent of Russia’s exports and supplied just 5.9 percent of its imports.

By contrast, the European Union used to be Moscow’s top trading partner, supplying nearly 40 percent of Russia’s imports and absorbing about the same share of its exports. These numbers highlight the EU’s leverage over Russia in the form of trade sanctions. Take Russia’s imports first. EU sanctions cover 54 percent of Russian imports from the bloc (based on 2021 data), creating headaches for the many Russian firms that rely on EU-made high-tech goods. By the end of 2024, for example, the Russian airline S7 had grounded 31 of its 39 Airbus A320neos for lack of access to spare parts. Without maintenance, S7 Airlines will have no choice but to decommission these planes in 2026.

Europe’s trade leverage over Russia is perhaps even greater when it comes to Moscow’s exports, mostly hydrocarbons. In this field, the Kremlin shot itself in the foot by curbing gas shipments to the bloc in 2022. (Despite the Kremlin’s claims to the contrary, the EU’s energy crisis at the time was not due to any sanctions but to the Kremlin’s own decision to cut off gas supplies). Since then, Europeans have been hard at work to diversify their energy suppliers, build infrastructure to import liquefied natural gas, and accelerate the expansion of renewable energy. There is no reason why they should not be able to continue these efforts, which will culminate in an EU ban on all Russian hydrocarbon imports starting in 2027.

Trump may not be keen to encourage a reset in EU-Russia energy ties in the form of a revival of Russian gas deliveries. The reason for this is simple: Washington and Moscow are competitors when it comes to supplying gas to the EU. Over the past three years, the United States has become the EU’s main supplier of LNG, accounting for almost half of the bloc’s imports. If Russia were to restart pipeline gas exports to Europe, demand for U.S. LNG would fall. Russian energy firms also compete directly with U.S. ones in LNG; Russia is now the EU’s second-largest supplier of LNG, and there is little doubt Moscow is eyeing the top place.

Europe’s energy leverage over Russia also extends to oil shipments. The G-7 and EU instituted a price cap of $60 per barrel on Russia’s oil exports that are shipped with the help of insurance firms or shipping lines based in the EU or other G-7 members. A potential U.S. exit from the price cap would be manageable for the rest of the group, particularly the EU. Tankers shipping Russian oil now dodge destinations in the G-7 and EU, but they often still come from Russian ports in the Baltic. This means that they need to transit through EU-controlled maritime chokepoints, giving the bloc leverage to enforce the price cap—for instance, by requiring that all ships transiting through EU straits have proof of proper (read: Western) insurance, something that Russian ships would be hard-pressed to do.

Greater European enforcement of the price cap would have at least two welcome side effects. First, it would require a serious strengthening of Europe’s ability to detect, track and target Russia’s oil tankers, part of the so-called shadow fleet used by countries to skirt sanctions. Currently, EU governments often rely on U.S. capabilities, including teams of targeters at the U.S. Treasury. A step toward more autonomy from Washington in this area may not be a bad thing. Second, Britain is a major player in both maritime insurance and intelligence gathering. A U.S. exit from the oil price cap may help restart post-Brexit collaboration between Britain and the EU on sanctions.

Moscow’s preparations for a return of Western firms represent a final area of EU leverage over the Kremlin. Data from the Kyiv School of Economics makes it clear that U.S. firms have long been minor players in the Russian market; in early 2022, only 18 percent of the 1,307 Western firms doing business in Russia were U.S.-based. By contrast, two-thirds of them called the EU home. As Moscow takes steps for a potential lifting of U.S. sanctions—and the return of Western firms—Russian leaders probably know that the real deal is about luring European businesses back, not American ones that were barely there in the first place.

To restart Russian operations, Western firms would need access to financial channels, which is another area of EU leverage. U.S. banks were never big players in Russia, and experience from Iran sanctions suggests that it would take a lot of convincing to get U.S. financiers to restart business in Russia; in the Iran case, U.S. banks feared a snapback of sanctions even after Iran gained sanctions relief. The few major Western banks that could facilitate a return of Western businesses to Russia are of EU origin, such as Austria’s Raiffeisen, which still has massive operations in Russia. If the EU wanted to tighten the sanctions screws, it could restrict the ability of EU banks to do business in Russia.

Finally, what about the Russian Central Bank’s frozen assets? On paper, the EU is the big player here. Most of these reserves are held in Belgium’s Euroclear and more than 60 percent of them appear to be denominated in euros—a conservative estimate based on scarce available data. What’s more, the European Commission administers the $50 billion loan that G-7 states granted to Ukraine by using the interest proceeds from Russia’s frozen assets. Yet there is a catch: Moscow appears to have written down these reserves in anticipation of not getting them back. This does not mean that Moscow does not care about them. But they are probably not a priority for the Kremlin, meaning the EU cannot use them as leverage.

If Europe manages to remain united—a big caveat, to be sure—it has huge sanctions leverage over Moscow in the form of trade ties and private-sector presence—two trump cards that Washington cannot play. This does not mean that U.S. sanctions, in particular measures restricting Moscow’s ability to place external debt in U.S. financial markets and access U.S. energy technology to maintain oil and gas production, do not bite. Yet for the Kremlin, the lifting of only U.S. sanctions is unlikely to be enough.

This means that Trump cannot give Putin everything he wants in the Ukraine negotiations, at least not on the sanctions front. The EU may well be the real player here, giving Trump at least one solid reason to include the bloc in negotiations over a potential end to the Russia-Ukraine war.