EU Leaders Aim to Break Impasse Over Oil Ban With Unity at Stake

(Bloomberg) — European Union leaders intend to give their political backing to a ban on Russian oil, paving the way for a possible agreement next month on a sixth package of sanctions targeting Moscow for its invasion of Ukraine.

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EU leaders are working to enshrine their support for the plan in a joint statement, which could still change before it’s issued during their two-day summit in Brussels on Monday and Tuesday.

The sanctions proposal would halt seaborne imports by early next year, while pipeline supplies would be banned only once the concerns of several landlocked countries are satisfied, according to people familiar with the talks. The leaders’ political support doesn’t mean a deal is imminent and several substantial hurdles remain to any accord.

Hungary has so far refused to back a compromise despite proposals aimed at ensuring its Russian oil supplies, said the people, who asked not to be identified because the talks are private. Budapest wants further assurances that it can continue to import Russian oil if its pipeline supply is hindered.

“I don’t think we are going to reach an agreement today,” Estonian Prime Minster Kaja Kallas told reporters on Monday. “So we’ll try to reach an agreement by the summit in June.”

Druzhba Pipeline

The EU’s latest proposal would ban seaborne oil from Russia by early next year while delaying restrictions on imports through the giant Druzhba pipeline, which is Hungary’s main source of crude imports, the people said. Hungary had previously suggested that an exemption to pipeline deliveries would secure its support.

EU sanctions require the backing of all member states. Several nations had previously opposed distinguishing between seaborne and pipeline deliveries over a concern that such a split was unfair as it would disproportionately hit their supplies, the people said. Others were worried that the proposed compromises would soften the package too much.

A measure to ban Russians from purchasing real estate in the EU was dropped from the latest version of the text following pressure from Cyprus, according to the people. Haggling over the terms of the EU’s oil embargo has also led other member states to seek exemptions to the proposed package.

If the EU can’t get Hungary on board with the sanctions plan, it would be a significant blow to the bloc’s united stance against Russia and an embarrassment to the European Commission, which announced the oil embargo plan several weeks ago.

Russia shipped about 720,000 barrels a day of crude to European refineries through its main pipeline to the region last year. That compares with seaborne volumes of 1.57 million barrels a day from its Baltic, Black Sea and Arctic ports.

However, the bulk of the pipeline deliveries are to Germany and Poland, which have signaled they will wean themselves off Russian supplies regardless of any EU action.

The package also includes a ban on insurance related to shipping oil to third countries, but it won’t take effect until six months after the adoption of the measures, from the previously proposed three-month transition, the people said. That adds to a longer list of concessions since the proposal was originally put forward by the European Commission in May.

Bulgaria would get a transition period until June or December 2024 and Croatia could get an exemption for imports of vacuum gas oil.

Other measures in the proposed EU sanctions package include:

• Cutting three more Russian banks off the international payments system SWIFT, including Russia’s largest lender Sberbank.

• Restricting Russian entities and individuals from purchasing property in the EU.

• Banning the ability to provide consulting services to Russian companies and trade in a number of chemicals.

• Sanctioning Alina Kabaeva, a former Olympic gymnast who is “closely associated” with President Vladimir Putin, according to an EU document; and Patriarch Kirill, who heads the Russian Orthodox Church and has been a vocal supporter of the Russian president and the war in Ukraine. Hungary, however, is opposed to sanctioning Kirill, the people said.

• Sanctioning dozens of military personnel, including those deemed responsible for reported war crimes in Bucha, as well as companies providing equipment, supplies and services to the Russian armed forces.