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China remains a “very big problem” because of the way it helps circumvent EU sanctions against Russia, with no signs that the practice is abating, the EU’s chief sanctions envoy, David O’Sullivan, said in exclusive comments to EU News.

“We raise it regularly at the highest level with the Chinese authorities but you know their answer, which is to say that they don’t feel they’re doing anything wrong, so we still have to take unilateral action against Chinese companies and financial institutions,” O’Sullivan said.

As Russia continues its illegal invasion of Ukraine, now grinding into its fifth year, Europe continues to sharpen its tools to inflict the most damage against Moscow’s economy to slow its war machine.

But the bloc has also been impacted by the war, with a Russian drone crashing into an apartment complex near Romania’s border with Ukraine on Friday, resulting in the injury of two people.

Diplomats in Brussels say the incident has quickened the pace of the 21st sanctions package, which is under preparation, highlighting the need to hit the Kremlin where it hurts for both the drone incursion as well as strikes on the war-torn nation.

O’Sullivan stated in an interview on EU News’ flagship morning programme Europe Today, however, that no matter which package is under development, China is blunting the power of the measures by helping Russia circumvent sanctions.

The 20th package of sanctions listed up to 56 companies associated in the development and manufacturing of military goods Russia is using on the battlefield against Ukraine. These companies — many of which are Chinese — were targeted for their provision of critical high-tech items used in the production of Russian weapons, such as drones.

O’Sullivan said that China is a master of “backfilling”, a process in which local producers replace goods previously supplied by international partners, covering everything from household products to military-related equipment. The latter is predominantly electronic components found in drones, missiles and artillery shields — and increasingly on the battlefield in Ukraine.

China, however, did not take the listings in the EU’s 20th sanctions package lying down. In response, Beijing retaliated by banning seven European defence companies from receiving Chinese-made products.This tit-for-tat has become a recurrence since the EU began adding Chinese entities to its ever-growing blacklist.

“The Chinese play hardball,” O’Sullivan said about the recent dispute.

“If we want to take action, they will also take equal action, but I think it is very important nonetheless that we continue to be able to send a strong message that we are vigilant about efforts to circumvent our sanctions and that where we see the evidence, we will take action.”

Russian oil

Another crucial question looming over the EU’s next sanctions package is the future of the full ban on maritime services for Russian oil tankers that the EU approved in its previous package but left on hold pending an agreement at the G7 level.

Greece and Malta, two coastal member states that have powerful shipping and flagging sectors, respectively, remain firmly opposed to the initiative. Meanwhile, G7 allies have shown little enthusiasm in applying the far-reaching measure amid the energy turmoil unleashed by the closure of the Strait of Hormuz.

G7 leaders are set to meet in Evian, France, later this month, but it is unclear whether the issue will be a part of the discussions or cast aside.

Asked whether a breakthrough is likely in Evian, O’Sullivan sounded pessimistic, citing the conflict in the Middle East and the spike in global oil prices.

“At this point, there is no appetite to take additional measures which might aggravate that situation,” he said. “We are in a new world.”

The full ban is meant to replace the price cap on Russian oil that the G7 established in late 2022 to weaken Moscow’s energy revenues. The cap is also challenged by the Hormuz blockade because, according to EU law, it has to be periodically adjusted to remain 15% below the average market price for Russian crude oil.

This means the next revision should be upwards, rather than downwards.

O’Sullivan said the bloc would need to take a second look at the cap.

“We should not increase the price cap to a point where it becomes unduly generous towards Russia, so I think that the objective is to keep it in or around the boundaries of where it is now to what was previously the maximum of $60 (€51.69),” he clarified.

In a move signalling a divergence from international alignment on sanctions, the White House has on three occasions granted exemptions on Russian oil sanctions due to the war in the Middle East. US Treasury Secretary Scott Bessent said in May that the measure was intended to keep global oil markets stable, but it has been criticised by Kyiv’s allies, who argue that Moscow is benefiting from tight supply conditions.

O’Sullivan said he would have preferred the American waiver “had not been granted”, but insisted this should not affect the bottom line, namely that Russia faces major challenges exporting its oil, particularly at attractive prices.

Patriarch Kirill

As EU News scooped last month, the new Hungarian government led by Prime Minister Péter Magyar has shown a willingness to sanction the head of Russia’s Orthodox Church, Patriarch Kirill.

The move, if unanimously supported by the 27 EU member states, would pave the way for the blacklisting of one of the most influential religious figures in Russia, who holds considerable political clout.

The EU first tried to sanction Kirill in 2022 for supporting the full-scale invasion of Ukraine and allegedly spreading revisionist propaganda. But Hungary’s former prime minister Viktor Orbán blocked the move, describing it as an issue of religious freedom.

O’Sullivan said he couldn’t reveal what is in the future package — and whether this included Kirill — but conceded that what is “clear” is that there is a change of policy led by the new Hungarian government.

“In the past, Hungary has vetoed a number of proposals for the sanctioning of entities or individuals. We will test how much that has changed,” he said.

O’Sullivan added that “names” previously mentioned, such as Kirill, may be included in the next sanctions package, but said he could not indicate whether he expected them to make it into the final list.