07/07/2022

The European Union debates whether to ease a ban on Russian oil imports to placate Hungarian leader Viktor Orban, who is blocking recent European sanctions on Vladimir Putin’s war machine.

EU diplomats who held a private meeting on Sunday deadlocked over a compromise plan that would ban the bloc’s Russian oil in tankers while allowing imports of the pipeline, a proposal that would allow Hungary, Slovakia and the Czech Republic to allow it to continue. It is supplied via the Soviet-era Druzhba pipeline, which runs through Ukraine.

More than three weeks after European Commission President Ursula von der Leyen proposed a complete ban on Russian oil imports by the end of the year, the European Union halted plans. Hungary, which relies heavily on Russian oil, said it would take five years and billions of euros to modernize its refineries.

The row threatens to overshadow a summit of European Union leaders on Monday and Tuesday in Brussels, formally dedicated to discussing economic, political and humanitarian support for Ukraine and the global food crisis.

European Union ambassadors are meeting Monday morning in a fresh attempt to reach a compromise on the oil embargo. “It might not work, it might work, but I think it’s our duty to try,” said a senior EU official. Excluding pipelines from EU sanctions would protect a third of Russian oil entering the bloc and maintain a valuable revenue stream for Moscow.

Ukrainian President Volodymyr Zelensky, who is due to address European Union leaders via video link on Monday, criticized the bloc last week for failing to reach an agreement on the oil embargo. “Look at the number of weeks the EU has tried to agree on a sixth package of sanctions against Russia,” he said on Thursday, noting that the EU was paying Russia about 1 billion euros (£850 million) a day for energy. “Where do those blocking the Sixth Beam get all this power from?”

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When the idea of ​​blocking the pipelines emerged weeks ago, many member states criticized it on the grounds that it would give countries that can continue to receive cheap Russian crude an unfair advantage. Internal estimates suggest that Hungary could benefit from oil that is 35% cheaper than neighboring countries. However, after weeks of deadlock, more and more countries are looking for ways to break the deadlock.

“Failure to reach an agreement or delay things further would be worse, but to see the consequences of blackmail is also disappointing,” said a senior EU diplomat.

This issue has deepened the wedge between Hungary and its traditional allies in Central Europe. A senior Polish diplomat said he could not understand the logic of Budapest’s policy towards Ukraine, and described opposition to the oil embargo as more political than technical. “They got everything that is technically reasonable,” they said.

Hungary offered Hungary a two-year delay in imposing the oil embargo to give it time to retool its refineries and build new oil routes from its southern neighbor, Croatia.

Some advise against a hasty deal, because the proposed oil embargo was not due to take full effect until the end of the year. Others believe the delay is sending a terrible political signal as Russian forces appear to be gaining the upper hand in the Donbass through relentless artillery barrages and air strikes.

Hungary angered some EU countries when it said the issue should not even be discussed at Monday’s summit. “It will only highlight our internal divisions without offering a realistic opportunity to resolve differences,” Orban wrote last week to European Council President Charles Michel, who is organizing the meeting.

Budapest is seeking EU funding to modernize its refineries, which currently can only handle Russian oil. Orban complained that the European Commission’s latest plan outlining how the EU could move away from Russian fossil fuels does not provide enough detail about EU funding for landlocked Central Europe.

In that plan, known as RePowerEU, the commission made a controversial proposal to allow member states to sell excess carbon credits, which could make burning fossil fuels cheaper. It also proposed the voluntary transfer of funds from other parts of the EU budget.

However, some of the decarbonization money will be directed to a recovery plan that is not available to Hungary due to long-standing concerns about the rule of law in the country. The country was denied €7.2 billion in funds from the European Union’s Covid recovery fund because it failed to convince EU officials to ensure the money was spent properly.

Hungary is considered vulnerable because the Druzhba pipeline – which translates to “friendship” – runs through Ukraine. A senior Ukrainian official last week described the part of the pipeline to Hungary as “a significant influence”. According to the comments, Olena Zerkal, an adviser to Ukraine’s Energy Minister, said it would be “very appropriate if something were to happen to this pipeline”. This was reported by the Ukrainian news agency Ukrinform.

Hungary’s opposition means other measures in the EU sanctions package have yet to come into effect, including tighter controls on Russian banks and imposing asset freezes and travel bans on dozens of top Russians, including a former gymnast rumored to be Vladimir Putin’s friend and boss. It is said to be the Russian Orthodox Church, Patriarch Kirill.