EU Set to Ban Russian Oil Imports After Compromise with Hungary

EU leaders agreed on principle to ban 90% of Russian oil imports by the end of the year. The bloc had been struggling to convince Hungary over its toughest sanctions on Russia since it invaded Ukraine on Feb. 24.

The agreement is expected to clear the way for other sanctions as well, including cutting Russia’s biggest lender, Sberbank, from the SWIFT international messaging system. This will be the sixth sanctions package the EU imposes on Russia if it goes through.

European Council President Michel said after the first day of a two day EU Leaders’ summit that agreement to ban Russian oil imports is in place. Michel added that this would immediately cover more than two thirds of oil imports from Russia, slashing a big source of funding for its war efforts.

Two thirds of all oil imports from Russia comes via seaborne tankers and one third through the Druzhba pipeline. An embargo on seaborne imports would therefore cover two thirds of all oil imports from Russia.

Once Germany and Poland, which are also connected to the pipeline, stop buying Russian oil by the end of the year, the ban would encompass 90% of all imports.

The remaining 10% will be temporarily exempt from the ban including supplies to Hungary, which had blocked the deal over energy security concerns, along with Slovakia and the Czech Republic.

Hungary appeared to get some reassurances from other member states that emergency measures would apply if sudden interruptions of supply occur. Budapest has raised its concerns about risks posed to the Russian oil pipeline that goes through Ukraine to Hungary.

The ban on oil imports to EU countries will apply to Russian crude that is delivered by oil tankers.

It was not clear how member states that receive oil from tankers would be compensated for the higher cost compared with those that will keep the pipelines open.

Earlier in the meeting, Ukrainian President Zelenskiy accused the EU leaders of being too soft on Russia as the ban on oil imports still seemed elusive.

Zelenskiy questioned why the EU would be dependent on Russia while it should have been vice-versa. He also said Russia continued to earn almost a billion euros everyday by selling energy.

Since the start of the Russian invasion of Ukraine more than three months ago, the EU has imposed five rounds of sanctions with uncharacteristic speed and unity given the complexity of the measures.

But the ban on oil imports took a long time as EU members feared economic risk for Europe grows. Many EU member states depend on Russian crude.

Dutch Prime Minister Rutte said he was surprised by the turn of events. He said he was not hopeful they could reach a deal early in the evening but around 11 p.m. everything was sorted.

The summit also brought backing for a package of EU loans worth €9 billion, with a small component of grants to cover part of the interest, for Ukraine to keep its government going and pay wages for about two months.

Leaders also backed the creation of an international fund to rebuild Ukraine after the war, with details to be decided later.

The second day of the talks will focus mainly on accelerating work to help Ukraine move its grains out of the country to global buyers via railroad and truck, since Russia’s blockade of Ukraine’s Black Sea ports continues.

Need to access the insight?

Start your 7-day free trial now

Need to access the insight?

Start your 7-day free trial now

Need to access the insight?

Start your 7-day free trial now

Do you need to access special insights on this matter?

Start your 7-day free trial  and become a member today

Subscribe to Top Insights Today

Subscribe to Executive Newsletter Top Insights Today

The Executive Newsletter -Top Insights Today- puts global business events in perspective through special insights

Join the ranks of global executives and subscribe to Top Insights Today

Top Insights Today covers insights on energy, clean-tech, oil&gas, mining, rare earths, defense, aviation, infrastructure, manufacturing, electrical vehicles, big-tech, finance and politics of business

By clicking subscribe you agree to our privacy and cookie policy and terms and conditions of use.

Read more insights

Explained: The G7 Oil Price Cap

One of the primary targets of the Western governments in recent months have been to put a price cap on Russian oil to cut Moscow’s energy revenue, which fuels its revenues used for the invasion of Ukraine. So far, the West has imposed sweeping economic sanctions on Russia, but they have had scant success to diminish export revenues. Higher-than-expected oil export volumes and rising gas prices have driven Russian energy revenues up. Moscow expects energy export volumes to surge by a massive 38% this year. That is the most crucial reason why late last week the G7 nations, as well as the European Union, agreed to a Russian oil price cap aimed at curbing Kremlin’s revenues.

EU’s Single Market Emergency Instrument Faces Business Backlash

The European Commission proposed The Single Market Emergency Instrument, a measure that could force Europe-based companies to prioritize production of key products and stockpile goods under draft EU rules that would give Brussels emergency powers to tackle supply chain crises. The legislation that was put forward on Monday is considered as a response to bottlenecks caused by the pandemic and Russia’s invasion of Ukraine. 

U.S. Led IPEF to Build Emergency Semiconductor Stockpile

The US-led Indo-Pacific Economic Framework (IPEF) is considering to build a shared emergency semiconductor stockpile. The 14 nations included in the framework will likely to have mutual access to the stockpile if supply chain disruptions occur. The world has realized the fragility of supply chains, particularly regarding semiconductors, during the pandemic and Russia’s invasion of Ukraine. The proposed system would see member states sharing inventory data and risks, in addition to cooperation on alternative sources of supplies. Apart from semiconductors, personal protective equipment (PPE), rare earths and storage batteries were reportedly included as well.

Stay informed

error: This content is protected !!