Sanctions on Russia

Sanctions are not one thing. Asset freezes and travel bans apply to named individuals and entities. Sectoral measures restrict whole categories of activity: exporting technology, importing oil, providing insurance, accessing capital markets. Financial measures cut named banks out of payment messaging and correspondent relationships. Each is imposed through its own legal act and each can be lifted separately.

The two big jurisdictions work differently, and the difference decides how markets should be priced. EU measures are Council regulations, which require unanimity among member states to adopt and, crucially, to renew - the sectoral measures come up for renewal on a fixed cycle, and a single government can block continuation. US measures are executive orders and agency designations, which one administration can impose or revoke without a legislature, unless a statute has locked them in.

That asymmetry is the single most useful thing to understand for pricing. In the EU, lifting requires the same unanimity that imposing did, which makes reversal slow and visible. In the US, a designation can be removed by the agency that made it, which makes reversal fast and, for market purposes, much harder to see coming.

Energy is the transmission channel that reaches everyone. Russia was Europe's dominant gas supplier before 2022 and remains one of the world's three largest oil producers, so measures touching those flows move global prices - which is why the design of the oil sanctions has consistently prioritised redirecting revenue over removing barrels.

The price cap is the clearest example of that logic. Rather than banning Russian crude outright, the G7 restricted Western shipping, insurance and financing to cargoes sold below a set price. The intent was to keep the oil flowing while compressing the seller's margin - a deliberate compromise between punishing Russia and protecting the oil market.

The response was a parallel logistics system: older tankers under opaque ownership and non-Western insurance, commonly called the shadow fleet. Each round of designations targets more of those vessels, and each round has produced a temporary widening of the discount on Russian crude followed by partial adaptation. That cycle - designation, discount, adaptation - is the pattern to price.

Every measure has a published home, and this is what makes sanctions markets settleable at all. EU acts appear in the Official Journal on the day they take effect. US designations appear on the Treasury sanctions list and in the Federal Register. The UK maintains its own consolidated list. A market that names one of these has an unambiguous answer; a market that says sanctions imposed does not.

The renewal calendar is the EU's distinguishing feature. Sectoral economic measures are adopted for a fixed period and lapse unless the Council renews them unanimously before expiry. That creates recurring, dated decision points which have repeatedly been the subject of prediction markets - and which occasionally produce genuine drama when one member state signals a veto.

Immobilised central bank reserves sit under their own arrangements. Roughly three hundred billion dollars of Russian reserves were frozen in 2022, most of it held in the EU, and the profits generated by those holdings have been directed to Ukraine. Whether the principal itself can be used is a separate legal question that has been debated continuously since - and it is a favourite subject for markets whose wording rarely matches the legal reality.