EU wraps up Russian oil ban – but how tough will it be? – POLITICS

European Union officials are fine-tuning a phase-out of Russian oil imports that could be presented to EU countries as early as next week, but it’s still unclear how much they will dare to squeeze President Vladimir Putin’s main source of income.

Oil revenues are crucial to fueling the war in Ukraine, but diplomats eager to deal a crushing blow to the Kremlin fear European action will be severely watered down in a bid to win support from more reluctant EU countries like Germany and Hungary.

An immediate, comprehensive oil ban by the EU is still a no-go for Germany as a business location. Berlin has signaled to other EU capitals that it is willing to consider a cut in Russian oil – even if it is not yet ready to give up gas imports – but only under certain conditions, which are now agreed with the European Commission to be discussed.

Foreign Minister Annalena Baerbock on Wednesday called: “Oil imports will be halved by the summer and will be zero by the end of the year.”

According to officials and diplomats, an EU oil embargo should distinguish between different Russian oil qualities and delivery by tanker or pipeline to the EU. In 2020, of Russia’s total crude oil exports of 2.8 million barrels per day to Europe, 0.7 million bpd came by pipeline and the rest by sea.

As with the recent sanctions against Russian coal, transition periods are also being discussed to give EU countries time to prepare for a possible embargo.

The details of the ban could be presented to EU ambassadors as early as next week, diplomats said.

When it comes to the different types of oil that could be banned, EU refiners are largely set to work with a Russian oil called “Ural crude” – a mixture of heavy oil from the Ural and Volga regions mixed with lighter oil from Western Siberia. Such an alignment would be a sign of genuine intent.

Russia also exports a lot of heavy fuel oil and vacuum gasoil, which is mainly used to make diesel, and directly supplies 10 percent of the EU’s finished diesel — a sensitive issue for an embargo ahead of the summer peak season.

But “if the ban consists of too many exceptions, the rest of the world will see through it,” said an EU diplomat.

Essentially, oil sanctions are a game between mutually dueling dependencies. The Bruegel think tank calculated that Russia supplied 3.5 million bpd out of the total EU imports of 15 million bpd in 2021. It found that the EU and the UK together paid Russia 88 billion euros for these imports. That doesn’t necessarily give Russia all the clout, however. Putin is almost backing Europe half of its oil exports and diversification would not be easy.

“Of course, stopping oil imports makes sense,” says David Mühlemann, raw materials expert at the Swiss NGO Public Eye. “That would be a huge market gone for Russian oil that couldn’t be replaced overnight,” he added, pointing to a lack of infrastructure in both Russia and the buyer countries.

As Russia’s latest offensive in eastern Ukraine increases the pressure for action, Brussels has been keen to keep an oil embargo out of the headlines, in part because fuel prices are such a hot topic in Sunday’s French presidential election, in which far-right leader Marine Le Pen, a Putin -Admirers, take on incumbent Emmanuel Macron.

Raw Calculations

If Europe were to target Ural crude, light crudes from Iran and Saudi Arabia would be the closest ready-to-buy substitutes – but experts say the biggest challenge is logistical, with Russian oil going directly to many refineries via pipelines without the need for delays on waterways and ship transport must be taken into account.

In any case, “all refineries are quite flexible and many are extremely flexible in terms of accommodating a variety of crudes – there are many refineries in Europe that have, for example, 60 different crudes in their tanks, that’s part of the resilience of the liquids industry fuels,” said Alain Mathuren, communications director at FuelsEurope, the association of European petroleum refiners.

The European Commission has been going back and forth with EU countries to come up with a proposal that is politically acceptable for all 27 capitals.

Hungarian Foreign Minister Péter Szijjártó earlier this week stressed that Budapest will not support sanctions against Russian oil and gas. But the Hungarian concerns are economic, not political, several diplomats said, paving the way for a political compromise to address these concerns, for example through solidarity measures.

While Germany and Hungary have been the most vocal in opposing a ban on Russian oil and gas, a group of other countries including Austria, the Czech Republic, Slovakia and Bulgaria are also concerned about the economic fallout from further energy sanctions.

“The question is: if we ban oil, will it hit Russia or the EU economies harder? Russia sells oil to other countries and will get money that way,” said a senior Central European diplomat.

The point in time when the EU would actually sign a new package of sanctions also remains vague.

“This will not happen overnight,” said a senior EU diplomat. “Therefore, the time has come to sit back down and work out the details, especially when you see the deteriorating situation on the ground in Ukraine.”

Zia Weise and Leonie Kijewski contributed to the reporting.

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