The EU is embarking on its 17th package of sanctions against Russia over its unprovoked invasion of Ukraine, but the ground on which the West has maintained economic pressure on Moscow has been shaken by US President Donald Trump, along with almost every other aspect of the transatlantic security alliance.
The Trump administration has openly talked of relaxing sanctions on Vladimir Putin's Russia and boosting economic ties, even before a single concession has been made by the Kremlin.
Is the US president motivated by the desire to build a Trump hotel on Red Square, or is he making a wild gamble that Mr Putin will respond generously to the inducement of relaxed sanctions?
Either way, it's yet another dilemma for the EU in maintaining international pressure on Russia.
David O'Sullivan, the Irish official who is currently the EU's sanctions envoy, is clearly anxious about the noises from Washington.
"We would not like to see concessions on sanctions made too early, nor in the context of a temporary ceasefire [in Ukraine]," he told RTÉ News.
"Rather we want to see that happening in the context of a more enduring and sustainable peace," Mr O’Sullivan added.
The phone call
Everything stems from the 12 February phone call between Mr Trump and Mr Putin.
Having bullied Ukraine’s President Volodymyr Zelensky into accepting an unconditional 30-day ceasefire, Mr Trump then settled for a much more limited ceasefire over the Black Sea when Mr Putin refused himself to agree to the 30-day truce.
Not only did the Black Sea ceasefire, agreed between US and Russian officials in Saudi Arabia on 25 March, benefit Russia more than Ukraine, it came with some startling Russian demands.
Russia asked that the state-owned Rosselkhozbank be reconnected to the international payments system SWIFT, while companies, insurance brokers, Russian-flagged ships and equipment suppliers all connected to the food and fertiliser sectors be freed from international sanctions.
"It looks like the crunch point might come in the second half of 2025 because the indicators are flashing even redder than before."
The Trump administration said it would "help restore Russia's access to the world market for agricultural and fertiliser exports", without clarifying whether sanctions would be lifted.
This triggered alarm bells in Brussels.
Mr Trump was giving away something only the Europeans could concede, since the SWIFT payments system is headquartered in Belgium.
"The re-Swifting of [Rosselkhozbank] is a European decision," an EU official said.
"We’ve said clearly we're not going to do that. I don't quite know how that then plays out, because the Russians attached a condition to the Black Sea ceasefire, which requires the European the lifting of European sanctions, not the lifting of US sanctions."
Brussels sees this as a tactical ploy by Russia to add further tension to the transatlantic relationship.
Other experts were puzzled by the Russian demand, given that neither food nor fertiliser from Russia have been restricted by Western sanctions.
"It is unclear why this evidently impossible demand was raised," said Alexander Kolyander, in a paper for the Centre for European Policy Analysis (CEPA).
"Either those who requested it (likely from Russia’s agriculture ministry) don't understand the details of international finance, or the Kremlin may hope its demand would encourage the US to strong-arm Europe and so deepen the transatlantic rift."
Conjoined Kremlin strategies
Either way, it has put the EU on notice that unpicking Western sanctions along with stringing out the process of a ceasefire are now conjoined Kremlin strategies.
Since Mr Putin's invasion of Ukraine in February 2022, the EU, in conjunction with the G7 and other partners, has imposed a range of sanctions which can be scaled up or down as necessary.
The aim is threefold: prevent the Russian military from accessing the technology needed to produce advanced weapons, starve the military-industrial complex of funds, and generally degrade the Russian economy.
More than 2,400 individuals involved in supporting the invasion have been sanctioned, imports of coal and oil have been banned, and the export of dual-use goods and advanced technologies has been curtailed.
The effort has also led to the freezing of €200 billion of Russian Central Bank assets and the removal of Russian banks from SWIFT. There were sweeping export controls.
Since the sanctions began, Russia's share of the EU's global trade in goods has fallen from €253bn in 2021 to €68bn in 2024.
The impact was not immediate, and by last year it seemed that Russia was weathering the storm quite well.
The Russian economy grew by 3.6% 2023 and was estimated to have grown by 4.1% last year.
The country's current account surplus was expected to exceed $60bn in 2024, up from $50bn in 2023, with high oil revenues keeping the budget deficit manageable.
'Crunch point'
Russia was adept at sourcing Western technology for its military through third countries and made up for lost trade from Europe thanks to increased trade with China and India.
However, with a weakening ruble, chronic labour shortages, inflation stuck at 10%, and interest rates at 21%, EU officials believe the Russian economy could reach a critical moment by 2026 if not sooner.
"Towards the end of last year," a senior EU official said, "people were saying it looked as if the Russian economy could last until 2026.
"Actually, it looks like the crunch point might come in the second half of 2025 because the indicators are flashing even redder than before."
Despite ever-present sanctions circumvention, G7 sanctions have deprived Russia of more than $450bn in revenue, pushing up the cost of military components by 30% and delaying the deployment of materiel to the battlefield.
While Russia got around the G7 oil price gap by creating a shadow-fleet of "ghost" tankers to ship oil around the globe at a higher price than the capped figure, the G7 has relentlessly targeted this by sanctioning some 400 vessels.
As a result, flag states like Panama, Honduras and Barbados have deregistered the ships, making it harder for them to enter international ports.
"We can see from satellites that these ships are, in many cases, just floating around the ocean, with nowhere to go," a senior EU figure said.
That's why Mr Trump’s overture to Mr Putin has so enraged European capitals.
Lifeline
The lifeline thrown to Russia boosted the ruble and gave both the Putin regime and the Russian population a badly needed psychological lift.
European capitals remain in the dark as to whether rumours of the US lifting aviation sanctions are true, or whether this would simply involve granting licences to individual Russian airlines.
On 10 April, TASS reported Russia's ambassador to the US Alexander Darchiev claiming that, following bilateral talks in Istanbul, both sides had stressed the importance of resuming direct flights in order to "expand business ties and contacts".
Mr Trump has vaguely threatened tariffs or secondary sanctions against Mr Putin for not getting on board with his 30-day ceasefire idea.
This has provided a modicum of comfort for European diplomats even if these threats remain empty.
"The Americans have gone both ways," one source said.
"They said they're going to do more sanctions and on occasion, when specific sanctions have come up, they say they might be relaxed.
"But it's very clear the Americans see sanctions as leverage over the Russians for whatever deal might happen in the end," the source added.
This might also work in the EU's favour when confronted with Hungary's Viktor Orbán’s relentless and single-handed efforts to frustrate European pressure on Russia.
On 31 July, the EU is due to roll-over a range of sanctions on Russia, everything from restrictions on trade, finance, banking (i.e., the denial of access to the SWIFT system), energy, fossil fuels, technology and dual-use goods, industry, transport and luxury goods.
Since the roll-over requires unanimity, Mr Orbán could upend almost the entire sanctions effort.
However, if the Trump administration signals to Mr Orbán that sanctions remain a useful tool in coercing Mr Putin, then he may quietly drop his objections (few in Brussels trust any commitment from the Trump administration at the moment).
If not, the EU is already in thinking mode.
Options on the table
One option is that 26 member states enshrine the sanctions in their national laws and apply them that way; there is also talk of triggering Article 7 of the Lisbon Treaty to deny Hungary voting rights in the Council of Ministers (seen as the nuclear, and less likely, option).
There is also increased speculation about phasing out Russian LNG.
At present the EU only blocks trans-shipments of Russian LNG through its ports, although purchases of LNG have fallen dramatically.
The European Commission has proposed a non-binding target of ending all reliance on Russian fossil fuels by 2027 through a mixture of renewables and other sources, but there is no detail on whether sanctions or tariffs would be part of that project.
Hungary and Slovakia have blocked attempts to ban Russian LNG in the most recent sanctions packages.
There are suggestions the EU could consider tariffs or quotas to phase out LNG in that tariffs would raise revenue that could offset Hungary's and Slovakia's concerns, but nothing has crystalised yet.
Furthermore, some European buyers of energy are suggesting that if there is any kind of a ceasefire in Ukraine then Europe should resume imports of Russian gas, not the 157 bcm it imported before the invasion, but closer to half that.
Much is entangled now in the trade war with Mr Trump, who has been griping about the EU not buying enough US LNG.
Should the Russian LNG be further phased out, the EU could get more of its LNG from the US.
However, US LNG is more expensive, and some countries like Germany already get 90% of their LNG from the United States.
Unity of purpose
Either way, the EU is desperate to maintain unity of purpose on Russia; officials are all too well aware that any concessions by the Trump administration to Russia could weaken the overall effort, even if EU sanctions pack a much more formidable punch.
"The strength of the sanctions has been the degree of unity shown by the G7+ coalition," Mr O’Sullivan said, "we would very much like to see that unity maintained."
He added: "The European view is that sanctions are having a considerable impact on the Russian economy and are an important bargaining chip in the context of any negotiations."
Mr O’Sullivan believes the Trump administration is well aware of this.
"The messages we get from Washington are a little contradictory," he said.
"Because sometimes there is talk of increased economic cooperation, which might suggest lifting of sanctions, sometimes there's talk of putting additional sanctions on Russia.
"Our strong hope would be that we can maintain the unity and maintain the sanctions as an important point of leverage."
