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EU leaders reach compromise on Russian oil embargo

European Union leaders have agreed to block more than two-thirds of Russian oil imports following a late-night summit in Brussels on Monday. The embargo will only affect oil that arrives by sea. Pipeline oil will be exempted for now, following opposition from Hungary.

“This immediately covers more than two-thirds of oil imports from Russia, cutting a huge source of financing for its war machine,” said European Council chief Charles Michel.

President of the European Commission, Ursula von der Leyen also welcomed the compromise underlining that the agreement reached today as part of the European Union’s sixth sanctions package is an important step forward.

As a result of the agreement, Russian seaborne oil is to be immediately banned, which constitutes two-thirds of Russian oil imports.

By the end of the year, Poland and Germany pledged to stop importing pipeline oil, which will raise coverage of the ban to 90 per cent. Poland’s Prime Minister has described an EU embargo on Russian oil as a triumph and a key message for the security of Poland and Europe.

However, not all Member States were so supportive of cutting off Russian oil supplies. Hungary, which imports 65 per cent of its oil from Russia was the most vocal opponent of the embargo arguing the cost of phasing out Russian crude imports is unacceptable for Hungary. Therefore Budapest was seeking an exemption for pipeline imports from the start, which held up the EU’s latest round of sanctions.

Hungarian Prime Minister Viktor Orbán declared the agreement a victory for his country saying that they succeeded in defeating the Commission’s proposal to ban the use of oil from Russia in Hungary.

Orbán pointed out that the EU is on the brink of a global economic crisis because of sanctions. According to the Prime Minister, in such circumstances, it would have been unacceptable to run the Hungarian economy with more expensive oil.

Source: S&P Global Platts, BBC

Other landlocked Central Eastern European countries, such as Slovakia and the Czech Republic, also asked for more time due to their dependence on Russian oil. Bulgaria, which already has been cut off from Russian gas, had also sought opt-outs, arguing that if there would be a derogation for some of the countries, they want it as well.

Commission President Ursula von der Leyen said they will soon return to the issue of the remaining 10 per cent of pipeline oil. However, the details are still to be worked out as so far it is unclear how long the derogation for oil pipelines will last.

Russia provides 27 per cent of the EU’s oil, 40 per cent of its gas and 46 per cent of coal imports which cost 99 billion euros last year. As a response to Russia’s aggression in Ukraine, the EU decided to take further measures to cut its dependence on Russian energy imports.

On 8 March, the Commission published its REPowerEU plan, outlining measures to drastically reduce Russian gas imports from its 2021 level of 155 bcm before the end of this year – and reach complete independence from Russian fossil fuels well before the end of the decade by diversifying supplies, reducing demand and ramping up the production of green energy.

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