E.U. proposes ban on Russian oil imports by end of year – The Washington Post

The phaseout is more gradual than the immediate embargo some countries had been pushing. It would ban oil imports after six months and refined petroleum products by the end of the year.

The announcement also didn’t mention Russian gas, a matter of increased urgency since Moscow last week cut off natural gas to Poland and Bulgaria and threatened the same fate for other countries that refuse to pay in rubles.

Still, the oil ban represents a dramatic shift for the E.U., which in March told the United States it couldn’t join a Russian energy embargo.

“Putin must pay a price, a high price, for his brutal aggression,” European Commission President Ursula von der Leyen told the European Parliament in Strasbourg on Wednesday.

“Let us be clear: It will not be easy,” she said. “Some member states are strongly dependent on Russian oil. But we simply have to work on it.”

Hungary and Slovakia raised particular objections in the course of negotiations, saying they needed more time and money to upgrade their oil infrastructure. And it was unclear Wednesday whether they had been brought fully on board.

A spokesman for the Hungarian government, Zoltan Kovacs, tweeted that the proposal does not include provisions that his country’s “energy security would be guaranteed.”

An E.U. official and an E.U. diplomat, speaking on the condition of anonymity to discuss internal deliberations, said the proposal granted extensions for Hungary and Slovakia.

Von der Leyen did not mention any extensions Wednesday. Eric Mamer, a commission spokesman, said at a news conference that the proposal took the concerns of heavily dependent countries “into account,” but that the European Council would “decide the way forward.”

The plan was discussed by ambassadors on Wednesday. European diplomats will continue to hash out the details on Thursday and Friday. If all countries agree, it could be adopted as early as the end of the week, according to diplomats and officials.

The oil plan is the centerpiece of the E.U.’s sixth round of sanctions, a package that also would remove Russia’s biggest bank, Sberbank, and two others from the SWIFT system for international transactions. Additionally, von der Leyen said, the E.U. would ban three Russian state-owned broadcasters from the bloc’s airwaves.

The package takes aim at high-ranking military officers and “other individuals who committed war crimes in Bucha,” said von der Leyen, referencing the Ukrainian town where evidence of Russian atrocities has led to accusations of war crimes. It also targets those “who are responsible for the inhuman siege of the city of Mariupol,” she said.

“This sends another important signal to all perpetrators of the Kremlin’s war: We know who you are, and you will be held accountable,” she said.

The Kremlin has not yet felt much impact from the U.S. embargo on Russian energy imports. Thanks to price increases, Moscow has continued to rake in about the same amount of money from fossil fuel sales as it did before the invasion, according to estimates by the Wednesday Group, a team of experts tracking Russian energy sales. That adds up to about $1 billion a day, and possibly $1.5 billion a day, in revenue.

The gradual E.U. timeline would give Russia some ability to dull the impact of the oil ban and line up alternate buyers. Analysts note that it has already increased oil sales to India, which previously bought little.

But fully replacing the E.U. market would be difficult — not doable in a matter of months. And because Russia earns more from oil and petroleum products than from natural gas, analysts say even rising gas prices wouldn’t make up the difference to the country’s bottom line.

Here’s where Russian oil flows

“It could be potentially very painful for Russia,” said Ben Cahill, an energy security scholar at the Center for Strategic and International Studies. “Europe is Russia’s critical export market.”

It could also have ripple effects around the world.

“Sanctions on this scale are a much bigger step than anything done so far,” Cahill said. “It does suggest higher prices for potentially a long time to come.”

The challenge for Russia, Cahill said, is that reshaping its export system and diverting oil that has been flowing through pipes to Europe requires major infrastructure investments. And while India and China have shown recent interest in bringing in Russian oil at a deep discount, there’s a limit to their appetite.

“It’s not like it is easy to divert all that oil and find buyers in Asia,” Cahill said.

The challenge could become even greater if Western countries consider secondary sanctions, punishing countries that continue to buy Russian oil. Cahill added, though, that “it is not easy to shut off exports altogether from the world’s largest exporter of crude oil and petroleum products.”

Rystad Energy, an independent research firm, similarly determined in a report this week that “it will take some time for Russia to retune its logistic chains and find enough buyers for its crude beyond Europe and the US.”

Russia lacks storage capacity, meaning it will be forced to cut production, according to Rystad. And its drilling activity will be hurt as a result of reduced investments and technologies from abroad. Rystad predicted that it would be at least 2026 before Russia could return to drilling at the level it did before its invasion of Ukraine.

Since the invasion, the E.U. has worked closely with the United States and other allies to sanction Moscow, but it has struggled to unwind its reliance on Russian fossil fuels — a vulnerability U.S. officials and others warned about for years.

In 2020, the bloc imported about 35 percent of its oil from Russia, along with 40 percent of its natural gas and nearly 20 percent of its coal, according to the E.U. statistics office.

In March, when President Biden announced a U.S. ban on Russian oil and gas, the E.U. said it could commit only to reducing Russian gas imports by two-thirds by year’s end.

Nearly a month later, as graphic footage of atrocities in Bucha started circulating, the E.U. moved ahead with a coal ban.

Bucha massacre tests Europe’s red lines on Russian energy

The oil deal finally gained momentum after Germany — one of Russia’s biggest customers — said it had found alternative suppliers and would be comfortable with a gradual phaseout.

Reaching a draft plan with a good chance of approval involved extensive debate on exceptions for Hungary and Slovakia, diplomats and officials said. Though there is some sympathy for the predicament of Budapest and Bratislava, Hungary securing concessions would raise eyebrows.

Hungarian Prime Minister Viktor Orban has close ties to Russian President Vladimir Putin, and the E.U. has frozen Hungary’s pandemic recovery funds over concerns about democratic backsliding and rule-of-law breaches. Last week, the bloc triggered a mechanism that could lead to holding back tens of billions of dollars in subsidies.

The length of the phaseout and the possible extensions were greeted with disappointment from those who had called for a full energy embargo.

“In our eyes, more would have been possible,” said Rasmus Andresen, spokesperson for the delegation of the German Greens and a member of the economic and budgets committee.

“The exceptions now envisaged for certain countries and the long transition periods weaken the impact,” his statement said.

In a note to investors, Bjornar Tonhaugen, Rystad’s head of oil markets research, assessed that “a heavily watered-down version of the initial proposal” is likely, given Hungary’s stance.

“The feasibility of Europe eliminating its entire 1.5 million bpd of oil product imports to zero by the end of 2022 should be viewed with skepticism,” Tonhaugen said.

Halper reported from San Luis Obispo, Calif. Steven Mufson in Washington contributed to this report.