Hurting Russia hurts, it turns out in Brussels

The European Commission and the European Commission alone are to blame. At his entrance on Monday at the EU summit in Brussels, the Hungarian leader Viktor Orbán will play the organ in full. About the rumors that an EU boycott of Russian crude oil is almost over? “Oh yeah? I don’t know anything.” About the criticism that he behaves like Putin’s straw man within the EU? †fake news†

What Orbán says he knows for sure: that the EU countries have been unable to agree on new sanctions for weeks is because of “the very irresponsible behavior of the Commission”. According to him, he made proposals too quickly and without proper consultation with the EU member states to block the oil supply from Russia. It was justifiable that earlier sanctions were introduced quickly, says Orbán on the red carpet of the European Council building. “But energy is a very serious subject. It’s not child’s play.”

It was predictable: as sanctions against Russia become heavier and thus hurt the countries that impose them, the more difficult it becomes to keep the front closed against Putin. This was successful in the first five sanction packages, but this time the unit is really being put to the test for the first time. The core and the biggest stumbling block is a ban on the import of Russian oil.

More than two thirds of the Russian oil that reaches the EU comes by sea. It would be possible to discontinue these deliveries

The fact that the EU is co-financing Putin’s war machine with the import of gas and oil is causing growing discomfort among EU heads of government. Many countries do not want to stop gas completely, at least not too soon, but an oil boycott would already be a serious setback for the Kremlin. However, a number of small Eastern European countries are protesting the new package. Hungary, the Czech Republic and Slovakia are highly dependent on Russian oil and can only convert their refineries for oil from other countries in the long run and at great cost.

compromise text

The Hungarian concerns are not considered unreasonable in Brussels: the Central European country does not have a port to supply alternative energy sources. But Orbán also expects a large financial contribution for the conversion of oil installations and factories.

On Monday, EU leaders discussed a compromise text in which the supply of Russian oil by sea will be stopped, but may continue for the time being by land, and therefore via Hungary. “That is going in the right direction,” said Orbán, but he is also concerned: the so-called Druzhba (Friendship) pipeline from Russia runs through Ukraine. Last week, an adviser to the Ukrainian Ministry of Energy hinted that “something could happen” to the pipeline. On Monday, Orbán demanded “guarantees” from his fellow leaders that “if an accident happens” Hungary can try to get Russian oil “by other means”. Boycott or not. If necessary by sea.

175 million euros per day

Every day, Russia pumps about 750,000 barrels of oil through the Druzhba to Hungary and beyond, according to the International Energy Agency (IEA). So they remain untouched. But the remaining 1.75 million barrels per day transported by sea to Europe would be restricted. Based on the current oil price – which rose again on Monday morning following the first reports of a possible deal – that amounts to about 175 million euros in lost revenue. Every day again.

On arrival in Brussels, Prime Minister Rutte said the percentage of Russian oil withheld by the EU could rise further over time. Germany and Poland are also linked to the same Druzhba pipeline, but they want to break with the import of Russian fossil fuels by the end of this year. According to Rutte, Russia could lose more than 90 percent of its income from Europe.

Orbán is counting on a large financial contribution to convert oil installations and factories

The question is how hard Orbán is playing, because in the meantime he is also in danger of losing his most important EU ally: Poland. Both countries have come under fire for political interference with judges and media and have therefore managed to get along well in recent years. Since the war in Ukraine, the atmosphere has soured. Poland wants to take tough action against Russia, Hungary is on the brakes. Traditionally, the heads of government of the ‘Visegrad countries’ – Poland, Hungary, the Czech Republic and Slovakia – meet before every EU summit for preliminary consultations. That has not happened since the beginning of the war.

Threat

Polish Prime Minister Morawiecki called on Orbán to embrace the compromise. And he added a threat. If Budapest blocks the sanctions package anyway, Warsaw will push for special measures that will also make Hungary pay more for energy. “The idea is that a country that uses Putin’s oil should not benefit from it.”

Heads of government on Monday aimed for a ‘political agreement’ in broad terms, the details of which must then be worked out quickly. There are still many ifs and buts. The question is how long the exception for overland oil will last. The draft text of the compromise that circulated on Monday does not say a word about this. And there is still a transition period for all other countries anyway, to give their economies time to prepare for a world without Russian oil. These are the tough nuts that diplomats will have to crack in the coming days, or weeks if things go wrong.

The longer it takes, the more time Russia also has to adapt to the new situation. In recent months, it has been busy shifting its export routes, to countries such as China and India. That went at hefty discounts, which according to experts in the oil sector rose to 35 percent. Even with those lower prices, Russia can eventually replace the tens of millions in lost revenue from Europe. China now imports 1.6 million barrels daily.

Nervousness

Finally, the question is what the boycott ‘Europe’ itself will cost. Energy prices have already skyrocketed in recent months. Each new boycott only increases the nervousness further. The oil boycott is particularly sour for the Netherlands. Of all Russian crude oil that reaches the EU by sea, half arrives via the port of Rotterdam. For Rutte, that was reason to insist on extra guarantees, which must guarantee that there remains a ‘level playing field’ and that the pain is ‘fairly distributed’. The Netherlands wants cheap Russian oil that travels overland to Hungary and other countries to stay there – and therefore not end up on the energy market.

Latvian Prime Minister Krisjanis Karins denounced the tug-of-war. “The Ukrainians are fighting for their independence and for our values. Values ​​we now take for granted. They are willing to die for it and we must help them do that. Only when Russia is defeated can Europe feel safe.”