The French push to remove Uzbek-Russian businessman Alisher Usmanov from the sanctions list was stopped by Latvia at the last minute.
Latvia has opposed the removal of Uzbek-Russian businessman Alisher Usmanov from the European Union's sanctions list, blocking a compromise deal favoured by France.
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Instead, it has proposed a two-week extension of the restrictions to continue deliberations until the country goes to the polls on 3 October, diplomats said.
"As long as Russia continues the war, Europe's pressure must become stronger, not more convenient for the Kremlin," Latvian Prime Minister Andris Kulbergs saidin a video published on Monday just before midnight.
France has linked Usmanov's removal to the release of two French nationals currently imprisoned in Azerbaijan, angering other member states. Uzbekistan, the country where Usmanov was born, is said to have facilitated the arrangement.
Slovakia has also demanded Usmanov's removal, though for different reasons.
In a bid to break the week-long impasse, Ireland, the country that holds the EU Council's presidency, proposed on Monday a compromise that would remove Usmanov and another businessman, Mikhail Fridman, from the sanctions list but extend the whole regime for an unprecedented 36 months to prevent undesirable vetoes.
Member states expressed support for the compromise, even if many diplomats acknowledged it was hard to stomach. As negotiations unfolded on Monday, Ukrainian officials took to social media to express their displeasure and opposition.
Latvia was the only country that did not lend its green light, thwarting the required unanimity. Envoys met again on Tuesday morning to continue talks, but neither Latvia nor France backed down. Discussions will resume in the afternoon.
The sanctions need to be renewed by the end of the day. Otherwise, the entire list of 2,600 names, including Russian President Vladimir Putin, will fall apart.
In his video, Kulbergs said his country would work with Brussels and Paris to find a "suitable solution for Latvia's interests".
"Extending sanctions for 36 months would be the right step. However, the price for it must not be simply striking both individuals from the sanctions list," he said.
"Latvia cannot accept such an offer."
The prime minister said he would convene an emergency meeting of his cabinet on Tuesday to discuss the contentious matter. Foreign Minister Baiba Braže said "other countries" should be asked to explain their positions.
Latvia, together with the other two Baltic countries, Lithuania and Estonia, has long advocated a strategy of maximum pressure on Russia.
The country is heading to the polls for a parliamentary election next month.
The EU sanctioned Usmanov in the early days of Russia's full-scale invasion of Ukraine, citing his "close ties" to Russian President Vladimir Putin and interests in "key sectors" of the Russian economy that provide "substantial" revenue to the state.
The 73-year-old businessman, whose fortune is estimated at $16.6 billion, has denied the allegations and challenged the sanctions, which entail a travel ban and asset freeze.
"Sanctions are a core pillar of our response to Russia's war," High Representative Kaja Kallas said on Monday, speaking on the sidelines of the United Nations conference in New York. "We aim to close them soon and hopefully have the rollover swiftly."
This article has been updated.