European leaders reach agreement on partial Russian oil embargo

European leaders reach agreement on partial Russian oil embargo
Prime Minister of Hungary Viktor Orban (R) arrives for a special meeting of the European council, at the European Union headquarters in Brussels, Monday 30 May 2022. Credit: Belga / Nicolas Maeterlinck

At an extraordinary summit at the European council, European leaders have agreed on a partial embargo of Russian oil imports into most EU Member State, according to President of the European Council Charles Michel.

This embargo will cover more than two-thirds of imports of Russian oil and should be around 90% effective by the end of the year, according to President of the European Commission Ursula Von der Leyen. After formal approval on the ministerial level, there is expected to be a “6 to 8 months” delay before the embargo comes into force.

Europe remains the largest importer of Russian energy. Russian crude accounts for around 29% of total imports to the EU in 2021 or 2.4 million barrels every day, according to the International Energy Agency (IEA).

This embargo is intended to punish Russia and reduce Europe's reliance on Russian energy. In a comment on Twitter, Michel stated that the embargo would cut off “a huge source of financing for (Russia’s) war machine.”

Abandoning Russian crude

This partial embargo primarily concerns imports of crude oil transported by ship, which represents the majority of exports to Europe. For now, crude oil shipped to Europe by pipelines will remain free from the embargo, in order to ease the transition away from Russian oil and protect supplies in some vulnerable countries.

Countries like Belgium and the Netherlands receive the majority of their crude oil through their ports, rather than through pipelines. This means that they will willingly forgo one of their largest suppliers of crude oil imports.

Several European countries feared that an effective ban on oil tanker deliveries would give a distinct advantage to both Germany and Poland, who will maintain oil imports through a branch of Russia’s Druzhba pipeline.

As a result of the summit, however, both Berlin and Warsaw have given written confirmation that they will abandon all imports of Russian oil by the end of the year, raising the efficiency of international sanctions.

Embargo exceptions

There had originally been signs of growing divisions within the European Union. Two distinct camps had formed, those for an embargo, and those against. Certain nations, such as Russia-friendly Hungary, and central European countries Slovakia and Czechia, had asked to be excluded from any oil embargo.

There were fears that these exclusions would weaken international sanctions and the international front against Putin’s war in Ukraine. Tensions had been building between the Hungarian leader Viktor Orban and European leaders over guarantees on energy security.

Pipeline oil deliveries account for 86% of Hungarian supply, 97% in Czechia, and 100% in Slovakia, heightening dependence on Russia.

The result of this summit has now reached a compromise between these countries. The European Union has partially acquiesced to the demands made by Hungary, Slovakia and Czechia, ensuring the functioning of oil supplies through the southern Druzhba pipeline.

In a general softening of the EU’s rhetoric, Dutch Prime Minister Mark Rutte stated that the exceptions were necessary as a stepping stone towards a total embargo.

“What these countries were saying is that their refineries are strongly linked to Russian oil, it’s a legacy of the Soviet period. They can’t just switch to another oil, it takes time. They will have this time.”

One of the key stipulations of the compromise is that oil imported through pipelines from Russia cannot be used to gain energy leverage within the EU. Any oil received from Russia must be used domestically, and not resold to other European countries.

Belgian Prime Minister Alexander De Croo has affirmed that these compromises will last for a “short period” until necessary adjustments are made in European oil refining. De Cross states that the European Commission is eager to ensure that this agreement does not last long.

Temporary measures

Until reversed, these exceptions reduce the efficiency of the European embargo by around 10%, but leaders hope that this will soon become a comprehensive package.

Despite the delayed start to the sanctions, Member States have been warned about the possibility of “sudden interruptions in supply”, which would trigger “emergency measures.”

One of Hungary’s primary concerns, which were assuaged by exemptions established by the Commission, related to the likelihood of complete disruption of supplies to oil through the Druzhba pipeline.

According to De Croo, countries that suddenly lose supply of oil during their embargo exemption period will now be allowed to seek “alternative supply” from Russia.

Widening sanctions

As part of the sixth sanction package imposed on Russia, the European Council also agreed on a number of other sanctions targeting Russian banking, broadcasting, and individuals.

Even more Russian banks, including Sberbank, will now be excluded from the SWIFT payment system. Furthermore, three major Russian state broadcasters have also been banned from operating within the EU. Individual sanctions have also been levelled against officials implicated in war crimes in Bucha and Mariupol.

Representatives of the 27 EU member states have also agreed to roll out further financial support for Ukraine, of a total value of up to €9 billion. These preferential rate loans will help cover Ukraine’s liquidity needs and ensure the normal functioning of the Ukrainian economy.

EU leaders are set to meet again on Tuesday 31 May to discuss the EU’s collective response to Russia’s invasion of Ukraine.

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