EU agrees to gradual Russian oil embargo and grants exemptions to Hungary

  • The embargo aims to affect Russia’s ability to finance the war
  • Will be implemented gradually over 6 to 8 months
  • Ban grants an exclusion to Hungary, Slovakia and the Czech Republic
  • Countries divided over more EU sanctions targeting Russian gas
  • Leaders explore ways to mitigate soaring energy prices

BRUSSELS, May 31 (Reuters) – European Union leaders have agreed to an embargo on imports of Russian crude oil that will take full effect by the end of the year, but Hungary and two other landlocked states Central European countries have obtained exemptions for imports via the pipeline on which they depend. .

The ban, agreed overnight after weeks of wrangling, aims to halt 90% of Russian imports of crude into the 27-nation bloc by the end of the year, officials said.

This is the toughest sanction to date imposed on Russia for its invasion of Ukraine, and it will itself affect the EU, where energy prices have soared and where inflation is nearing a double-digit clip.

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Russia accounted for just over a quarter of EU oil imports in 2020, while Europe is the destination for almost half of Russian exports of crude oil and petroleum products. Read more

“The sanctions have a clear objective: to induce Russia to end this war, withdraw its troops and agree a reasonable and just peace with Ukraine,” German Chancellor Olaf Scholz said.

Ukraine said it would deprive the “Russian military machine” of tens of billions of dollars. Read more

French President Emmanuel Macron has said nothing can be ruled out over further sanctions, even as other leaders have poured cold water on the idea of ​​banning purchases of Russian gas, on which Europe is heavily dependent. .

EU countries will have six months to stop imports of Russian crude transported by sea and eight months for refined products, the European Commission said.

That timeline will begin once the sanctions are formally passed, which EU states are aiming to do this week.

EXEMPT HUNGARY

The deal was only reached after other EU leaders agreed to give Hungary a pass, failing to convince Prime Minister Victor Orban in weeks of talks. Read more

Two-thirds of Russian oil imported by the EU arrives by tanker and the rest by the Druzhba pipeline.

Poland and Germany are among the pipeline importers, but have pledged to stop buying Russian oil by the end of the year.

Hungarian Prime Minister Viktor Orban listens to a question from the media as he arrives for the European Union leaders’ summit, as EU leaders try to agree on Russian oil sanctions in response to the Russian invasion of Ukraine, in Brussels, Belgium, May 30, 2022. REUTERS / Johanna Géron

Landlocked Hungary, Slovakia and the Czech Republic all get their Russian oil from Druzhba and account for the 10% of imports temporarily exempt from the embargo.

Bulgarian Prime Minister Kiril Petkov said his country had also been granted an exemption until the end of 2024, since its refinery is designed to receive only Russian crude.

Oil prices rose after the EU deal, fueling inflation, which has already hit a record 8.1% year-on-year in eurozone countries this month. Read more

THE NEXT GAS?

The oil embargo follows an earlier ban on Russian coal and allows the bloc to impose a sixth round of sanctions that includes the removal of Russia’s largest bank, Sberbank (SBMX.MM), from the international transaction system. SWIFT.

Commission chief Ursula von der Leyen said the package would also ban European companies from insuring or reinsuring ships carrying Russian oil. Read more

Ukrainian President Volodymyr Zelenskiy welcomed the latest sanctions but criticized what he called an “unacceptable” delay of more than 50 days since the previous EU package. Read more

Several countries already want to start working on a seventh cycle, but Austrian Chancellor Karl Nehammer said he could not include Russian gas, which covers a third of EU needs.

“Russian oil is much easier to offset… gas is completely different, so a gas embargo won’t be an issue in the next sanctions package,” Nehammer said.

Russian analysts and traders said the gradual introduction of the embargo gave Moscow time to find new customers in Asia.

“Although the measures announced by the European Union appear threatening, we do not see a crippling impact on the Russian oil sector – neither imminent, nor in six months,” said analysts at Sinara Investment Bank. Read more

Beyond sanctions, EU leaders have asked the bloc’s executive to explore options to tackle soaring energy prices. These include “temporary caps on import prices”, which should be explored with international partners, according to their findings.

They also endorsed a Commission plan to wean the EU off all Russian fossil fuels within a few years through faster deployment of renewables, energy-saving improvements and more investment in energy infrastructure.

And they called for better EU-wide contingency planning in the event of further gas supply shocks. Moscow cut off gas supplies to the Netherlands on Tuesday for rejecting its gas-for-rubles program, having already cut off Poland, Bulgaria and Finland. Read more

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Additional reporting by Gabriela Baczynska, Sabine Siebold, John Chalmers, Bart Meijer, Robin Emmott; Written by Ingrid Melander, Kate Abnett; Editing by John Chalmers and Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.

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