Escrow and Russian Oil Super-Profits: Revisiting an Old Sanctions Tool

If those seeking to restrict the oil profits of Russia had felt they were making progress in early 2026, with the recent designation of Russian oil producers Lukoil and Rosneft as part of efforts to restrict Russian oil sales and a growing willingness of European militaries to board vessels seeking to circumvent sanctions restrictions, the war in Iran and effective closure of the Strait of Hormuz has turned the tables. With oil trading around $100 per barrel, super-profits are pouring into the coffers in Moscow.

For Ukraine’s allies in Europe, this is particularly galling given their exclusion by President Trump from any consideration of the impact of his venture in Iran, and the resulting energy shock bestowed on the world which has opened up opportunities for Russia to cash in.

Capitals across Europe are caught in an invidious position neither of their own making or within their own control. Meanwhile, what little they can do has rung hollow. For example, the tough talk of boarding sanctioned and shadow fleet vessels carrying Russian crude has been, for the most part, empty. In short, and as pointed out by this author recently, the West’s sanctions strategy has lost its way. But that does not need to be the case, and although many argue the oil price cap (OPC) should be consigned to history and a full maritime services ban should be introduced, there may actually now be an opportunity to employ the OPC as a mechanism for restricting the bonus Russia is earning from the war in the Middle East, but by focusing greater attention on financial, as opposed to oil, flows.

Step Back in Time

This is not the first time Western powers have tried to manage the revenue earned from oil by a country subject to sanctions. In the early 2010s as part of their pressure on Iran, that ultimately led to the nuclear deal in 2015, the US and its partners recognised the abrupt termination of Iranian oil exports risked inducing a global energy shock. The result was a mechanism that allowed oil to continue flowing to countries such as China, India, Japan and South Korea, but focused on controlling the associated payment flows.

These payments were not paid directly to Tehran but instead were deposited in escrow, an account held securely in the name of Iran in a bank in the purchasing country, to which Iran’s access was restricted. Thus, whilst the funds notionally belonged to Iran, access was tightly controlled and the funds could only be used in certain benign cases such as for purchase of non-sanctioned products such as food and medicine.

While this model did not eliminate Iran’s oil income – and was of course also exposed to evasion risk – it certainly added significant pressure to Iran, as although Iran’s revenue existed on paper, its access to that liquidity for activities that violated sanctions and threatened global security was blocked. In short, US-led action decoupled the flow of oil – and thus the negative consequence on countries beyond Iran – from the use of sale proceeds.

Given the current state of global energy markets, you would think this is a model worth revisiting.

Has the OPC Finally Found its Calling?

The OPC was born at a time when Ukraine’s allies – like those confronting Iran 15 years ago – wanted to put pressure on Russia to restrict the funding of its military without exacerbating a global energy shock. The reality is the OPC was quickly circumvented and neutered by Russia with countries willing to pay the market rate for continued energy security. The paperwork used to allegedly comply with the OPC can easily be ordered online or via AI, although such paperwork is hardly ever required nowadays given the steps taken by Russia to create a parallel market for its oil sales that no longer relies on Western infrastructure.

This adaptation by Russia was entirely expected. No country, or for that matter company or oligarch, is going to surrender to sanctions under such a scenario. Shape-shifting and reinvention to avoid the clutches of the Western financial system are inevitable. And so too must Western sanctions policymakers adapt in turn – now is one such moment.

Whilst many, including this author, have called for the OPC to be thrown aside, it may actually have finally found its calling. Currently set at $44.10 per barrel, the global oil market is currently trading at least double that price. Countries are thus paying a super-profit to Russia.

But what if sanctions on the buyers were used to pressure the use of an Iran-style escrow system? Countries would get their oil, but Russia would – for now – be unable to access the windfall above the price cap of $44.10 it is currently earning as a result of the US-created global energy price shock. An additional benefit is for the Ukrainians who are watching an acceleration of Russia’s ability to replenish its dwindling national treasury, funds accrued in escrow might one day be included in a reparations settlement to rebuild their country.

In short, countries unconnected with the war do not suffer, Ukraine benefits immediately via the continued restriction on Russian oil revenue – and may well benefit in the future too from these restricted funds that might also reduce the financial burden on European budgets – and most importantly, Russia does not profit from the oil price spike.

Of course, all this is easier said than done. Just as the Iran solution required sustained diplomatic pressure, credible enforcement, and focused on a relatively concentrated set of buyers, so too would such an initiative be challenging for Ukraine’s allies to enforce against today’s buyers of Russian oil. But importantly, the Iran case demonstrated a critical principle: sanctions need not eliminate trade to constrain state behaviour; they can instead reshape the terms on which revenue is realised.

So, might this work in the Russia case?

Many will be pointing to holes and failings in this proposal; others will suggest this is a concession by Ukraine’s allies. For sure it is far from certain as a solution, but the status quo of weak European enforcement and effortless Russian circumvention is hardly a model of success.

The prize is considerable should it work, as an escrow-based approach offers three advantages over the current framework, a framework which is demonstrably not working. It aligns with market realities; it embeds control in the global financial architecture an area where there is longstanding evidence of sanctions effectiveness; and escrow creates a pool of funds that can be used as leverage in future negotiations or settlements.

In short, perhaps the time has come to consider not whether oil should flow, but on what terms it should be allowed to flow. This has been, in essence, the purpose of the OPC, but that has clearly failed. What was it Einstein is alleged to have said? A shift in thinking is needed given the current approach is being outpaced by the adaptation of both Russia and the global market. Efforts to tighten restrictions on shipping or expand vessel listings should certainly continue, aligning gaps in listing regimes between London and Brussels, but the history of sanctions suggests the more enduring point of leverage lies elsewhere, not in stopping oil from moving, but in controlling what happens to the money once it does.

Over a decade ago, policymakers confronting Iran and its oil revenue recognised perfect enforcement was unattainable, but a form of effect control was still possible, and powerful. Past can indeed be prologue. It is time for European sanctions policymakers to revisit that history.

© RUSI, 2026.

The views expressed in this Commentary are the author's, and do not represent those of RUSI or any other institution.

For terms of use, see Website Terms and Conditions of Use.

Have an idea for a Commentary you'd like to write for us? Send a short pitch to commentaries@rusi.org and we'll get back to you if it fits into our research interests. View full guidelines for contributors.