The European Union narrowly avoided a fiasco. Literally at five to twelve on Monday night at the special EU summit in Brussels, the heads of state and government agreed on a new package of sanctions against Russia.
It is the sixth of its kind. And while the first package of sanctions was agreed upon unanimously and without major objections from individual member states, this time it was already clear that there would be a dispute over the intended embargo on Russian oil supplies. “This is not child’s play, it is very serious. This means that we first need the solutions and then the sanctions,” said Hungary’s Prime Minister Viktor Orbán before the negotiations began.
At Hungary’s insistence, only Russian oil deliveries by sea are to be stopped for the time being. Pipeline transports will continue to be possible for the time being. Orbán celebrated this result himself on his Facebook account that night. He defended his country’s interests, he wrote, “Hungarian families can sleep soundly tonight.”
The EU Commission chief Ursula von der Leyen, on the other hand, tried to present the result of the summit in a different light. Despite the exemptions for pipeline supplies, oil imports from Russia to the EU would be reduced by around 90 percent by the end of the year, she said.
This number comes because Germany and Poland had already made it clear before the special summit that they did not want to benefit from the exception for pipeline oil. Like Hungary, the Czech Republic and Slovakia, both countries are connected to the only oil pipeline coming from Russia.
In Germany, the line known as “Druschba” (“friendship”) has so far supplied the large East German refineries in Schwedt and Leuna. So far, a third of Russian oil imports in the EU have come via the Druzhba, and two-thirds have been transported by sea.
Despite the sixth package of sanctions that has now been decided, the summit in Brussels marks a change in the attitude of the European Union in view of the Russian war of aggression against Ukraine, which began three months ago. In the first weeks of the war, the Union showed unprecedented unity with Moscow. In quick succession, the 27 member states agreed on increasingly severe penalties.
This united front is now broken. Russia’s aggression seems to have lost its terror for some governments. The result: the EU showed its familiar face again. Suddenly there was haggling again, it was about exceptions and transitional periods.
There was also haggling over financial benefits. A number of other points in the sanctions package have also been defused. Under pressure from Cyprus, rich Russians can continue to buy real estate in the EU. And Greece successfully resisted banning EU shipping companies from transporting Russian oil.
There was strong criticism of the outcome of the summit, especially in the European Parliament. Manfred Weber (CSU), head of the Christian Democratic EPP Group, could hardly contain his anger. He called for the abolition of the principle of unanimity in the EU, which continues to apply, for example, when sanctions are imposed.
“We finally have to put the basic architecture of the European decision-making mechanisms to the test,” said Weber. “I am no longer willing to let a single country in the EU stop us. If the EU wants to act, it must act. That is why unanimity must be abolished and majority voting finally applied.”
Rasmus Andresen, spokesman for the German Greens in the European Parliament, was also disappointed. He criticized the EU for allowing itself to be blackmailed by Hungary. He considers the oil embargo in its current form to be a “fatal signal to Russia”.
The agreement on the oil embargo was important because this is the crucial part of a comprehensive package of sanctions. This also provides for the exclusion of the largest Russian bank, Sberbank, from the Swift financial communications network. In addition, the state television news channel Russia 24 (Rossiya 24) and the state channels RTR Planeta and TV Center are to be banned in the EU.
After the punitive measures against Russia, the heads of state and government also agreed to provide Ukraine with further financial aid of up to nine billion euros by the end of the year. The government in Kyiv should be able to use the money to cover running costs such as pension payments and the operation of hospitals.
However, the political agreement on the sanctions package is not the last step. Now the decision must be made in writing or by a Council of Ministers. It is also conceivable that there will be further delays because not all details have been negotiated at the summit in Brussels. In EU diplomatic circles it was said that the ambassadors of the 27 member states will probably bow again to the compromise this Wednesday.
It was initially unclear what concessions Hungary received apart from the exemption for pipeline oil. Before the summit, Orbán had called for precautions to be taken in the event that Hungary would not receive pipeline oil due to a possible attack in Ukraine. The summit conclusions now state that in the event of sudden supply disruptions, “emergency measures will be taken to ensure security of supply”. However, Hungarian government representatives had also demanded financial compensation in view of the long-term overhaul of the Hungarian energy infrastructure. So surprises are still possible.
According to estimates by the business news service Bloomberg, losses for Russia could total up to 22 billion dollars this year. By stopping transport via the northern strand of the “Druzhba” route, revenue of around twelve billion dollars will be lost, and another ten billion dollars will be added by the boycott of tanker oil. But business media close to the Kremlin such as “Kommersant” or “rbc” take a fairly relaxed view of the EU decision.
Asia has long overtaken Europe when it comes to buying Russian oil, Kommersant wrote. Russian exports to the region have tripled since the beginning of the war, with India being the largest customer. The subcontinent is doing well because Russia sells the commodity at large discounts compared to the world market price. While at the end of May the price for a barrel of Brent was 116 dollars, India only had to pay 70 dollars.
In the short term, the logistics are causing problems that can hardly be bridged for an increase in deliveries. Tankers are already missing, and shipping companies and insurers are finding it difficult to calculate the risk. They have to fear that future sanctions will be imposed on them for transporting Russian oil.
Immediately after the agreement on the partial embargo in Brussels, the price of oil rose to its highest level in more than two months on Tuesday. North Sea oil Brent hit the $123.58 per barrel mark.
It is unclear what long-term effect the halt to tanker oil deliveries could have. Even if the markets may have already priced in the EU agreement, the head of the International Energy Agency (IEA), Fatih Birol, warned of a fuel shortage in Europe due to the upcoming holiday season.
“The oil markets could get tight next summer,” he told Der Spiegel. “As the peak holiday season kicks off in Europe and the US, fuel demand will increase. Then there could be bottlenecks, for example with diesel, petrol or kerosene, especially in Europe,” says Birol.