EU prepared to water down oil ban to secure agreement ahead of summit
The European Union (EU) is edging towards a watered down package of sanctions on Russia – which will focus on seaborne deliveries of Russian oil and exclude piped supplies.
This follows a sustained impasse between the EU and Hungary, which has delayed plans for a bloc-wide embargo.
The country remains the only holdout on the proposed phase out of Russian oil supplies, which is intended to be the centrepiece of the trading bloc’s sixth series of measures against the Kremlin since Russia’s invasion of Ukraine in February.
The EU is keen to secure an agreement that its member states can endorse at its special meeting of the European Council next week on May 30-31, with envoys set to meet in Brussels today ahead of the summit.
It has managed to unify the vast majority of EU member states behind a pledge to discontinue purchases of Russian oil suppliers over a six-month window, following approval for a ban on Russian coal imports earlier this year.
However, while Slovakia, Bulgaria and Czechia have secured longer two-year windows to curtail oil imports from Russia – Hungary has demanded a four-year transition period alongside a financial package of €750m to upgrade its refineries and expand a pipeline bringing oil from Croatia.
The demands have been the focus of extensive talks between the EU and Hungary, which has warned that halting oil imports from Russia would be a body blow to the its economy as the landlocked country can’t easily source supplies from elsewhere.
This has resulted in delays to other parts of the sanction package such as disconnecting Russia’s biggest bank, Sberbank from the SWIFT messaging system, banning Russian broadcasters from the EU and extending its list of people whose assets are frozen and who cannot enter the EU.
New plans reflect EU difficulties
Currently, the EU relies on Russia for around 25 per cent of its imports – three quarters of which is delivered by tankers to the 27-nation bloc.
Therefore, the reduced ban would still deal a significant blow to Russian oil trading – with the EU by far its biggest customer – but it would also create competition problems within the EU.
This is because Hungary, Slovakia and Czechia would get cheaper Russian oil for their refineries – which can sell their products all over the EU – while other countries’ refineries would have to pay more for imported Brent crude.
Despite the reduced scope of the sanctions package, any agreement would be a cause of relief to the EU.
Hungary’s opposition to an oil embargo had threatened to turn next week’s summit into a public relations disaster for the bloc, as it would both suggest disunity within the EU, and that it was less effective than allies such as the UK and US, which have already unveiled their own plans to discontinue Russian oil purchases.
An EU official told news agency Reuters: “It would be humiliating not to discuss the sanctions at all because there is no agreement, or to remove the oil embargo part of the package completely only to push through the other elements.”
“So the idea is to have an embargo on Russian oil and exempt the Russian Druzhba pipeline supplying Hungary only for some time, to give the European Commission and Hungary time to solve the problem.”
Since Russia’s invasion of Ukraine in February, the EU has spent €27.8m on Kremlin-back oil supplies.