The 20th Sanctions Package: Gearing Up for a Long War

A loan in three parts

The €45 billion 2026 tranche (which is equivalent to over half of Ukraine’s entire 2025 expenditures) breaks into three components: First, a €8.35 billion Budget Assistance Loan providing direct state budget support by covering civil service salaries, pension payments, utility maintenance, and essential public services disrupted by the war. Second, a €8.35 billion Macro-Financial Assistance tranche delivered in three conditional instalments. Third, and largest, a €28.3 billion Defence Industrial Capacity fund directed at procurement contracts with European and Ukrainian defence manufacturers.

A Three-Installement Structure

The €8.35 billion MFA tranche does not arrive as a single payment, but rather, it will be delivered in three instalments, each conditional on Ukraine meeting reform benchmarks assessed by the Commission and the IMF. The first instalment stands at €3.2 billion, the second €3.7 billion, and the third covers €1.45 billion. The front-loading of the first two instalments reflects the urgency of Ukraine’s situation, whose state budget faces a structural financing gap estimated at $40–50 billion for 2026.

To cover the gap, the Union will base its’ financing through three pillars: the IMF Extended Fund Facility (drawing rights established 2024), the G7 REPO Scheme using interests from frozen Russian sovereign assets (approximately €3 billion per year), and the EU Support Loan now operationalised by these instruments. The EU pillar is by far the largest.

37 listings and 80 new sanctioned entities

The individual listings reveal which sectors of the Russian war machine the EU believes it can pressure through targeted measures, which third-country evasion routes the EU has identified, and where Brussels draws the boundary between ordinary commerce and complicity in aggression.

The individual sanctions framework under Decision 2014/145/CFSP and Regulation (EU) 269/2014 now contains approximately 2,022 persons and 767 entities, with the new package adding 37 persons and 80 entities.

What is Brussels targeting?

The 37 persons fall into eight identifiable categories. The distribution lets us know where Brussels believes it can exert the most pressure, with a sizeable amount of the listings focusing on companies and people within, or adjacent to the weapons manufacturing sector.

Drones and weapons manufacturing

Drones are perhaps the defining weapon of the war, and therefore it stands to reason that they would be the most operationally significant cluster. The EU has named several individuals directly linked to these weapons systems:

Cultural Appropriation and Crimea Normalisation

The EU has developed a consistent theory of cultural sanctions, understood as the systematic erasure and appropriation of Ukrainian cultural heritage in occupied territories, which is considered by Brussels as a policy of colonisation to solidify Russia’s territorial claims.

Chemical Weapons

The listing of the Head and Deputy Head of Russia’s Radiological, Chemical and Biological (RCB) Defence Troops (the 35th Guards RCB Regiment) is among the most significant in the package. The EU states explicitly that this unit “systematically employs chemical weapons against Ukraine as part of a wider Russian strategy to weaken and destabilise Ukraine.”

Sanctions Evasion Networks

The evasion network listings reveal the geographic architecture Russia uses to route prohibited goods past EU export controls. Three jurisdictions (Kazakhstan, the UAE, and China) dominate the list.

Militarisation of Minors

Four listings target individuals implementing Russia’s programme of forcibly indoctrinating and militarising children from occupied Ukrainian territories. This cluster follows the International Criminal Court arrest warrant framework for the deportation and forced assimilation of Ukrainian children.

Propaganda and Disinformation

The 80 Entities: A Third-Country Network in Detail

The entity listings reveal the geographic architecture of Russian sanctions evasion mechanisms with great precision. The first batch of new entity entries (688 onwards) shows a consistent pattern, with an abundance of UAE free zones, Hong Kong and Chinese mainland companies, and Russian domestic military-industrial entities. The EU is actively targeting entire supply networks, rather than individual companies, through these listings.

The Shadow Fleet: Russia’s Oil Revenue Lifeline

One of the most consequential if least visible dimensions of this package is its assault on Russia’s shadow fleet. The 20th sanctions package adds 46 further vessel listings and designates a significant maritime insurer, bringing the total number of EU-listed shadow fleet vessels to 632. It also lists, for the first time, a third-country port facility: the Karimun Oil Terminal in Indonesia. Two Russian ports, Murmansk and Tuapse, are listed alongside it.

The shadow fleet is a collection of tankers, predominantly aged over 15 years, that Russia uses to transport crude oil and petroleum products while evading the G7 price cap mechanism. These vessels share a set of structural characteristics that distinguish them from legitimate commercial shipping, and are typically flagged in permissive jurisdictions with minimal oversight (Gabon, Palau, Cameroon, Cook Islands). They tend to carry insurance from non-western P&I clubs, if they even operate with valid coverage at all. Their ownership is purposedly hidden beneath layers of shell companies registered in the British Virgin Islands, the Marshall Islands, or Belize, and operate with AIS transponders switched off or transmitting deliberately false position data, something known in maritime law as “spoofing.”

Russia’s pivot to the shadow fleet followed directly from the G7 price cap of December 2022, which prohibited western maritime services, including insurance, finance, ship management and brokerage, from being provided to cargoes of Russian oil sold above $60 per barrel. The cap was intended to preserve Russian supply to global markets while denying Russia windfall revenues. Russia responded by setting up the shadow fleet, by buying up ageing tankers on the secondary market, routing them through opaque ownership structures, and insuring them through non-western clubs unaffected by the cap. By early 2026, Ukraine’s Defence Intelligence directorate estimated the shadow fleet at over 1,300 vessels, of which the EU has now listed 632, or roughly half.

The practical enforcement picture has begun to catch up with the legal framework, with an interesting scenario playing out in January 2026, as the US Navy and Coast Guard seized the Russian-flagged tanker Marinera in the North Atlantic, the first seizure of a shadow fleet vessel by western naval forces, and an operation that raised a lot of questions for Maritime Law experts. Following this, in February 2026, Belgian special forces detained the Guinea-registered tanker Ethera inside Belgium’s exclusive economic zone in the North Sea, having tracked it transporting Russian crude above the price cap. In March 2026, Sweden detained a crew member from the Caffa17, a vessel sailing under a false Guinean flag.

The enhanced due diligence requirements in this package tighten the screws further, as EU operators involved in tanker services are now required to flag vessels meeting a combination of risk indicators, such as a vessel’s age being over 15 years, holding insurance from a non-compliant club, or that the ship’s ownership is routed through more than two layers of opaque holding companies. Any vessel meeting two or more of those criteria triggers a mandatory enhanced checks obligation before EU services may be provided.

New Sectoral Measures: Five New Prohibitions

Beyond individual and entity listings, the package amends Regulation 833/2014 with five significant new economic prohibitions, each targeting a specific revenue stream or evasion vector.

The Belarus package adds three entities and five new prohibitions. It is smaller in volume than the Russia package but contains a geopolitically significant move, as a Chinese state-linked defence company is for the first time, listed under the Belarus sanctions regime.

The Belarus restrictive measures framework operates under Regulation (EC) 765/2006 and Decision 2012/642/CFSP, a separate legal regime from the Russia sanctions, reflecting Belarus’s lesser, but still existing role as an aggressor state. The regime now covers approximately 300+ persons and entities. The decision to list entities under the Belarus framework reflects the EU’s assessment that these entities are primarily embedded in the Belarusian military-industrial complex and state structure.

Key takeaways:

The EU is following specific supply chains: The HCl evasion network (Zhdanov, Bekov, UrSeCo, United Trading Group, Siltron) is reconstructed across multiple linked entries with documented shipment routes. The Garpiya-A1 drone chain (LIBBS, IEMZ Kupol, Chinese suppliers) is documented similarly. This level of supply chain specificity requires a very intense intelligence cooperation, most likely with US, UK, and Ukrainian agencies. Furthermore, when compared with 2022 sanctions, which mostly targeted state officials and oligarchs, these sanctions show an increased understanding of the global value chains that feed the Russian war effort, and tackling them directly.

The China dimension is escalating: This package lists two Chinese nationals (Li Xinyang, Beijing Xichao) and one major Chinese semiconductor company (Yangzhou Yangjie, 200+ shipments). The Belarus package simultaneously lists China Space Sanjiang Group. The pattern is no longer deniable: Chinese entities at multiple levels of the supply chain are actively supporting Russia’s war effort. The EU has been notably cautious about China-linked designations since 2022, conscious of trade dependencies and the desire to preserve diplomatic engagement with Beijing. This package however suggests that the EU is moving away from their well-known geopolitical caution, and is more open to take more confrontational postures against other geopolitical heavyweights.

The militarisation of minors is now treated as a systematic policy: Four listings in a single package focused exclusively on programmes that indoctrinate and militarise children from occupied Ukrainian territories. This mirrors the ICC arrest warrant framework and signals that the EU is building a coordinated legal and political record of these practices.

 The EU Braces for a Long War

The European Council’s December 2024 conclusions reaffirmed “continued support for Ukraine’s independence, sovereignty and territorial integrity within its internationally recognised borders” and called for efforts “to further limit Russia’s ability to wage war”, a stark difference with the US’ current behaviour towards the war. The approval of a €90 billion loan over two years, the grand expanding of listings, an LNG terminal ban, and a digital finance architecture targeting Russia’s parallel payment infrastructure are not the actions of an actor that believes that a real option for peace is currently on the table. Rather, they seem to be expecting the war to continue at least into late 2027.

The Defence Industrial Loan as a Long-Term Investment

The €28.3 billion defence industrial component of the Ukraine Support Loan represents the EU’s commitment to sustaining Ukraine’s military production capacity indefinitely, as a structural feature of the EU’s relationship with Ukraine. Combined with the MFF amendment that places loan servicing costs outside the budget ceiling, the EU has created a financing architecture designed to outlast any individual political cycle in any Member State. The most notable part of this, however, is how the effects of the loan will outlast both the loan itself, and probably the war itself.

The EU has long warned that their main geopolitical rival, and the one most likely to wage a serious war against them, is Russia. With this in mind, Ukraine provides something to the bloc that no other candidate country does, which is a large, militarized population with extensive experience on fighting Russia in a conventional war. With this loan, the EU does not only intend to assure the survival of Ukraine for the next two years, but it also intends to turn it into the bulwark of their eastern defenses, by massively investing on their military industrial complex.

As for sanctions, their effectiveness remains empirically contested. Russia’s GDP contracted less than expected in 2022–2023 and has since adapted, but this package is not primarily about macro-economic attrition. Rather, it seeks to target specific supply chains, specific weapons systems, and specific evasion networks that boost Russia’s ability to wage war. At that more granular level, the evidence base is more encouraging, as semiconductor import restrictions have demonstrably affected Russian production quality in certain weapons categories. The LNG ban could also meaningfully reduce hard-currency revenue available for military spending from 2027, although we must note that Russia’s capacity to adapt to sanctions has, so far, been remarkable.