EU agrees compromise deal on Russian oil import ban

31 May 2022

European Union leaders announced a compromise deal on May 31 that will see the majority of Russian oil imports banned in response to the invasion of Ukraine. European Commission President Ursula von der Leyen said that the EU will now be able to finalise a ban on almost 90% of all Russian oil imports by the end of the year.

Hungary's Prime Minister Viktor Orban at the EU Council meeting - Image: EU

The compromise deal was reached after European leaders handed concessions to Hungary which had been reluctant to agree to any sanctions that would negatively impact its economy. In May, the EU had proposed a complete ban on Russian oil imports, however Hungarian Prime Minister Viktor Orban said his country could not support the embargo as it would amount to dropping an “atomic bomb” on the Hungary’s economy.

To ensure Hungary’s support, EU leaders have said that the latest sanctions target oil arriving by sea, which accounts for around two-thirds of imports, and exclude oil transported via pipelines. Poland and Germany have already pledged to end pipeline imports from Russia, meaning around 90% of Russian oil will be banned. The remaining 10% will be exempt from the embargo so that landlocked countries comprising Hungary, Slovakia and the Czech Republic continue to have access to oil via the Druzhba pipeline from Russia. The three countries were also given assurances that in the event that the pipeline’s supply is disrupted, they would have an exemption to access oil imported by sea. Ursula von der Leyen has said that the EU would “soon return to the issue of the remaining 10% of pipeline oil.”

Around 27% of the EU’s oil is currently imported from Russia as well as 40% of its gas. No sanctions have been implemented targeting imported gas yet, however the recently completed Nord Stream 2 gas pipeline between Germany and Russia has been put on hold.

The embargo on Russian oil is part of a sixth package of EU sanctions which were approved by all 27 member states after several hours of discussions to resolve disagreements between those countries wanting a full ban and those who are apprehensive to sanctions, such as Hungary which imports 65% of its oil from Russia.

The resistance from Hungary has meant discussions about Russian energy import bans have been troublesome and lengthy. Hungary’s Prime Minister Viktor Orban, who has a friendly relationship with Russian President Vladimir Putin, said in a Facebook video posted following the breakthrough in discussions on May 31 that “[Hungary] succeeded in defeating the proposal of the European Council which would have forbidden Hungary from using Russian oil.”

Hungary, as well as other landlocked European countries such as Slovakia and Czech Republic, has previously said that it needed more time to reduce its dependency on Russian energy. Orban has said that his country would need at least five years and a significant amount of investment in its refineries and pipelines in order to be able to cut its reliance on Russian oil.

Rising energy prices around the world and fears of Russian repercussions have meant that some European countries were apprehensive about imposing full bans. Russia’s state gas company Gazprom has already stopped gas exports to Poland, Bulgaria, and Finland after demanding that payments are made in roubles. President Putin had previously said that “unfriendly” countries that do not pay for Russian gas in roubles would have their contracts stopped.

The ban on Russian oil follows the EU’s ban on coal which was announced in March along with the pledge to reduce gas imports by two-thirds. The March announcements followed similar bans from the US – which banned all imports of Russian oil, liquefied natural gas, and coal – and the UK. The announcements led to Russia threatening to close cut off all gas supplies to European countries via the Nord Stream 1 pipeline.

As part of its move to reduce its dependency on Russian gas, the EU signed a deal with the United States on March 25 that will see the US supply an additional 15 billion cubic metres (bcm) of liquefied natural gas (LNG) to Europe in 2022, with expected increases going forward. The deal will see the creation of a joint Task Force that will organise its efforts around two primary goals: diversifying LNG supplies in alignment with climate objectives and reducing demand for natural gas in order to strengthen European energy security and help reduce dependence on Russian oil and gas.

In a statement, the White House said the agreement’s long-term aim is ensuring, until at least 2030, demand for approximately 50 bcm/year of additional US LNG that is consistent with both US and EU net-zero goals.