After four weeks of tug-of-war, it was finally there: a political agreement on a European ban on Russian oil. The toughest EU sanction yet against the Kremlin. Prime Minister Rutte called it a “tough birth” in the night from Monday to Tuesday. It sure was. In the run-up to the summit, there was a feeling that the leaders would not come out, and the European unity of recent months seemed to be crumbling. Monday night there was still white smoke. But at what price?
Seasoned troublemaker Viktor Orbán can be satisfied: the Hungarian prime minister negotiated an exception at the top, so that his country will not participate in the boycott for the time being. Through the so-called Druzhba (Friendship) pipeline that runs through Russia and Ukraine to Europe, Hungary and other countries without access to sea are allowed to continue to import Russian oil. That exception dilutes the boycott, but the EU still deals a hefty blow. The oil shipped to ports in the Netherlands and Belgium, among others, accounts for two-thirds of the Russian supply.
Ultimately, the ban will even affect 90 percent of exports: some Druzhba oil ends up in Poland and Germany, and those countries made a firm commitment on Monday that they would stop buying that oil by the end of the year.
The oil discussion also delayed the other sanctions from the EU’s sixth sanctions package. Now the way is still clear for more sanctions against people and for the exclusion of the largest Russian bank from international payments.
Energy solidarity
Orbán was also promised ‘energy solidarity’: if the supply through the Druzhba stops for whatever reason, EU countries must help his country and if necessary allow Hungary to get Russian oil via another (sea) route, despite the boycott . Hungary gets 65 percent of its oil through the Druzhba.
It is special that Orbán is asking for European solidarity. In recent years, the Hungarian leader has regularly quarreled with Brussels because of the breakdown of the rule of law in his country. In his rhetoric, Europe is usually the cause of all problems. Now he is asking for EU protection in the event of an unexpected energy crisis.
Orbán didn’t get much either. Hungary demanded money to pay for the connection to another pipeline and the conversion of refineries. However, no financial commitments were made. Hungary can receive money from the European billion-dollar fund that was set up during the corona crisis, but for that it must meet a number of criteria, including respect for the rule of law. In the eyes of the European Commission, the country cannot yet overcome that hurdle.
There was also a dispute about the term that Hungary may benefit from the exception. Orbán wanted a settlement with no end date and there is indeed no such date in the final conclusions of the summit. But EU leaders made it clear on Monday that they want to keep the settlement as limited as possible and talk about it again as soon as possible. In short: the pressure on Orbán is great to really work on transforming his country’s energy infrastructure.
legal texts
The European Commission was busy on Tuesday to convert the political agreement of the heads of government into legal texts. At best, EU diplomats will approve it on Wednesday, after consultation with their capitals. The sanctions package could then come into effect on Thursday, albeit a phased ban on oil, to prevent prices in the oil market from exploding: imports of crude oil from Russia must be halted within six months, for refined oil, there is a phase-out period of eight months.
It is special that Orbán is asking for European solidarity.
In the worst-case scenario, discussions over the legal interpretation of the agreement will resume in the coming days, but EU diplomats and government leaders say any delays will be a matter of days, not weeks.
Russia now accounts for 27 percent of EU-imported oil and 40 percent of imported gas. Russia received about 400 billion euros a year for this, income that is now useful in the war against Ukraine. Because of the oil boycott, that war chest looks a lot less good. On the other hand, the EU still pays millions every day for Russian gas – saying goodbye to it takes more time and this summit seems to have reduced the appetite for further sanctions.
If Russia succeeds, as it is trying now, to shift oil exports to other countries, for example by ship to China, this could further undermine the effectiveness of European measures in the long run. That is why the EU is now also banning the insurance of tankers carrying Russian oil. The international market for such insurance is dominated by American and European companies.
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