Over the past two years, the EU and the UK have established themselves as the leading actors in imposing sanctions on Russia. Yet figures such as Maria Demertzis, a professor at the European University Institute in Italy, have questioned how effective the campaign can be while European institutions continue to run profitable subsidiaries inside Russia with little scrutiny. The implication for policymakers is that UK and EU regulators should widen the sanctions effort and examine European businesses that remain economically exposed to the country more closely.

New packages from London and Brussels

The UK's new Foreign Secretary, Ed Miliband, has announced his first Russia sanctions package. It targets six Russian banks, six shadow fleet tankers, and four Russian companies importing materials believed to support Russia's war in Ukraine, including tantalum and niobium — refractory metals widely used in aerospace, electronics, and defence applications, which is why their supply chains sit squarely within the scope of war-related export controls. Separately, in response to recent Russian attacks on Ukraine's economic infrastructure, the EU sanctioned five individuals linked to Russia's military-industrial complex.

With this announcement, the UK government has now sanctioned more than 3,400 individuals, entities, and ships under its Russia sanctions regime since 2022, with 500 designations made this year alone.

Leaving is not impossible

Russia has deliberately made it hard for European institutions to exit, in an effort to shield its economy. Moscow has imposed exit rules requiring foreign sellers of Russian assets to accept steep discounts and, in many cases, to contribute a portion of proceeds to the Russian budget — measures designed to make withdrawal costly and to keep foreign capital, technology, and expertise in place. Even so, regulatory pressure and exit roadmaps do exist. The European Central Bank has been stepping up pressure on Eurozone lenders to cut their Russian exposure or leave the country altogether. The EU's latest sanctions package — the bloc's 21st — introduces extensive transaction bans and asset freezes aimed at Russian financial institutions, energy actors, crypto platforms, and entities tied to Russia's military.

Nevertheless, some companies appear to have delayed these exit roadmaps in pursuit of profit.

TotalEnergies, the French oil supermajor, has retained its stakes in Yamal, Russia's largest LNG plant, while deconsolidating the holdings so that the income no longer appears in the company's official consolidated reporting. CEO Patrick Pouyanne has said the company earns roughly $400 million a year from selling liquefied natural gas from the Yamal LNG plant. Further income comes from dividends on TotalEnergies' 20% ownership stake in Yamal LNG and its 19.4% stake in Yamal's parent company, Novatek. In 2024, Pouyanne said dividends from Novatek amounted to about $600 million per year but were stuck abroad.

In July 2026, TotalEnergies announced it would exit its stake in the Arctic LNG 2 project after Russian authorities approved the transfer of the company's 10% holding to Nordline, a subsidiary of the plant's majority owner, Novatek. It remains unclear, however, whether TotalEnergies will be compensated for the stake, and if so, at what valuation.

TotalEnergies is not an isolated case. Similar policy questions arise in the UK, where investors hold exposure to companies that continue operating in Russia. That exposure is not, in itself, evidence of a sanctions breach. It does, however, raise legitimate questions about due diligence, governance, and the extent to which European capital remains tied to the Russian economy despite the declared political objective of economic disengagement.

The RETN example

One illustration is Njord Partners, the London-based special situations investment manager, which has been an institutional investor in RETN, an international network service provider, since 2017. RETN operates an international telecommunications network and maintains a presence in the Russian market through its Russian subsidiary, JSC RetnNet. Telecommunications networks are a particularly sensitive category in this debate, because connectivity infrastructure has dual economic and strategic significance and has featured in discussions about Russia's ability to sustain wartime communications. Nothing in this article suggests that Njord Partners, RETN, or JSC RetnNet has breached UK or EU sanctions simply by holding this investment or keeping an operating presence. The relevant issue is instead the degree of economic exposure involved and the level of regulatory scrutiny applied to companies whose subsidiaries continue doing business in Russia.

According to publicly available information, JSC RetnNet has had commercial relationships or agreements involving Russian organisations including GUP TEK, the St Petersburg fuel and energy utility; PJSC Rostelecom, Russia's major integrated digital services and telecommunications company; Rosbank; and the Kurchatov Institute. Some of these organisations, or individuals associated with them, have been subject to sanctions or other restrictive measures in certain jurisdictions.

That distinction matters. A commercial relationship with an organisation sanctioned in one or more jurisdictions does not, by itself, establish that any particular transaction was prohibited or that sanctions were violated. The legality of a transaction depends on factors such as the applicable jurisdiction, the precise sanctions designation, the nature and timing of the services provided, ownership and control tests, licensing arrangements, and the dates on which relevant restrictions took effect.

Rosbank, for instance, is designated under US sanctions, while restrictions on Russian financial institutions differ across the US, UK, and EU regimes. The Kurchatov Institute, likewise, has been subject to US export-control restrictions. Mikhail Kovalchuk, the institute's president, and his brother Yury Kovalchuk have also been sanctioned in several jurisdictions. Such designations raise the compliance sensitivity of dealings with these organisations, but they are not evidence that unrelated investors or service providers have themselves broken sanctions rules.

The governance question

The more pertinent question for European policymakers is whether the current regulatory framework offers sufficient visibility into the Russian activities of subsidiaries ultimately connected to European investors. Investors may be several corporate layers removed from individual contracts signed by an operating subsidiary, yet continuing exposure to Russia can still create sanctions-compliance, governance, and reputational risks that demand active oversight.

RETN's continued operation of a Russian subsidiary highlights a broader challenge for the European sanctions regime: European ownership or investment can coexist with ongoing Russian commercial activity without necessarily violating sanctions law. That may be legally permissible, but it raises a separate policy question about whether such continuing economic links are consistent with the strategic goal of reducing Europe's commercial exposure to Russia. It also points to a structural feature of sanctions enforcement today: regimes overwhelmingly target designated Russian entities, while the behaviour of non-designated European-owned subsidiaries operating lawfully in Russia sits largely outside their scope.

Public records and media reporting also indicate that Njord Partners has engaged APCO, the international communications and public-affairs consultancy. APCO has separately faced media scrutiny over work it undertook for the lobbying organisation Labour Together. Those matters are distinct from RETN and its Russian activities, and there is no publicly established basis for concluding that Njord's engagement of APCO was connected to Russia, RETN, or sanctions concerns. Inferring such a motive from the appointment alone would therefore be inappropriate.

What can legitimately be scrutinised is the wider governance issue. As sanctions regimes grow more extensive and complex, European investors whose portfolio companies maintain Russian subsidiaries face mounting pressure to demonstrate that effective compliance, counterparty screening, and oversight systems are in place. That scrutiny should center on verifiable transactions, ownership structures, and applicable sanctions rules rather than assumptions about intent or wrongdoing.

The next phase of sanctions

In recent years the UK and the EU have become clear leaders in sanctioning Russia and its entities. Yet the absence of scrutiny of European companies still operating in Russia has called the overall effectiveness of the campaign into question.

Fresh sanctions signal sustained pressure on Russia, but their impact will remain limited as long as European subsidiaries continue to run profitable business operations tied to Russian exposure.

The next phase of economic restrictions should therefore go beyond sanctioning Russian entities and require EU and UK regulators to apply greater scrutiny to European businesses that choose to stay economically exposed to Russia.

By Cyril Widdershoven for Oilprice.com