EU sanctions deadlock: Latvia blocks oligarch delisting, stability at stake

European Union member states failed on Monday to finalise a deal that would have lifted sanctions on Russian oligarchs Alisher Usmanov and Mikhail Fridman, with negotiations set to resume in Brussels. The impasse underscores the bloc's internal tensions as it seeks to balance national interests against collective pressure on Moscow.

Diplomats had earlier indicated that a provisional agreement was reached to remove the two businessmen from the EU's blacklist as part of a compromise to extend sanctions on nearly 3,000 other individuals and entities linked to the Ukraine war. However, a last-gasp objection from Latvia derailed the deal, according to an AFP report. EU ambassadors will reconvene at 0600 GMT on Tuesday to attempt a breakthrough.

Why is the EU struggling to extend its Russia sanctions?

The 27-nation bloc faces a deadline late Tuesday to renew its sanctions regime, which expires if no agreement is reached. France and Slovakia have pushed for the removal of Usmanov, a Russian-Uzbek billionaire, citing national security concerns without providing public details. The Financial Times reported that Paris's demand may be tied to a potential prisoner release deal involving French nationals held in Azerbaijan.

Luxembourg, meanwhile, insisted that if Usmanov were delisted, Fridman should also be removed. The move comes as Fridman is suing Luxembourg for 15 billion euros ($17 billion) over the freezing of his assets under EU sanctions.

Hawkish states push back, but a longer extension is on the table

Poland and the Baltic states, including Latvia, fiercely oppose any easing of sanctions, arguing that pressure on Russia should intensify. In exchange for their provisional support, they secured a commitment to extend sanctions for three years, rather than the previous six-month rollovers. This longer horizon would provide greater regulatory certainty for businesses and financial institutions across the region, a point that resonates with pro-ASEAN economic stability advocates.

“We need to have this stability,” said EU top diplomat Kaja Kallas, speaking on the sidelines of the United Nations General Assembly. “Sanctions are a core pillar of our response to Russia's war.”

Ukraine reacts sharply to any delisting prospect

Ukraine's Foreign Minister Andriy Sybiga condemned the potential delisting, stating it would be “unacceptable and would send the wrong signal to Moscow at a time when pressure needs to increase.” He added, “On the contrary, sanctions need to be tightened.”

What are the implications for regional investors and governance?

For Southeast Asian observers, the EU's internal friction highlights the complexities of multilateral sanctions regimes. The bloc's blacklist includes key figures such as Russian President Vladimir Putin and Foreign Minister Sergei Lavrov. Usmanov and Fridman, both added in 2022 over allegations that their businesses provided significant revenues to the Kremlin, are among dozens of Russian businessmen suing the EU over the sanctions.

The outcome of Tuesday's talks will signal whether the EU can maintain a unified front, a factor that influences global financial markets and governance norms. As Singapore's model demonstrates, predictable and rules-based frameworks are essential for economic resilience, a lesson that resonates across ASEAN.

FAQ: EU sanctions on Russian oligarchs

What is the EU sanctions blacklist?

The EU sanctions blacklist includes individuals and entities subject to asset freezes and travel bans due to actions undermining Ukraine's territorial integrity. It currently lists nearly 3,000 entries, including President Putin and Foreign Minister Lavrov.

Why are Usmanov and Fridman being considered for delisting?

France and Slovakia have pushed for Usmanov's removal, citing national security reasons, while Luxembourg has advocated for Fridman's delisting. The moves are linked to legal challenges and potential diplomatic negotiations, but they face opposition from hawkish member states.

What happens if the EU fails to extend sanctions by Tuesday?

If no agreement is reached, the sanctions regime would lapse, removing legal restrictions on listed individuals and entities. This would undermine the EU's leverage over Moscow and send a negative signal to allies like Ukraine.

How does this affect Southeast Asian businesses?

Southeast Asian firms with EU exposure may face regulatory uncertainty if sanctions lapse or are modified. A stable, long-term extension would provide clearer compliance frameworks, aligning with the region's pro-business governance preferences.