EU seeks to close ranks around plan for partial Russian oil ban

EU leaders are being asked to agree on a softened ban on Russian oil imports after weeks of deliberation, exempting a major supply route and leaving other details unresolved while trying to impose further sanctions against Moscow on Ukraine’s invasion.

A summit of leaders starting Monday night will promise to include oil and petroleum products in a package of sanctions, but will crucially allow for a “temporary” exemption for crude oil delivered through the pipeline, according to the draft conclusions seen by the Financial Times.

Conclusions may still change before EU leaders meet and diplomats have not agreed on how long each pipeline oil supply will last.

Removal of pipelines from any embargo was a key demand of Hungary, which argued that a ban would jeopardize its economy given its reliance on crude oil delivered by the Druze (Friendship) pipeline from Russia.

If exports on Druzebe are at a maximum capacity of the tube of 750,000 barrels per day, it will help Russia earn in the region of $ 2 billion a month from EU buyers.

A move to ban only Russian crude oil also risks distorting competition in the EU oil market, with refineries connected to pipelines from Russia enjoying a major advantage. The price of Russian oil has dropped to a huge discount compared to supplies from elsewhere, as European traders have shunned the country’s crude oil since the invasion of Ukraine.

An embargo only on the purchase of oil by sea will cover about two-thirds of Europe’s imports from Russia.

Russian Ural crude is trading at about $ 93 a barrel compared to $ 120 for Brent, the international oil index. While Russian oil transported through Druzeba may not receive such a large discount, depending on the structure of the contracts, the Hungarian oil group MOL said it enjoyed “Soars” Spaces to its refineries since March due to “Brent-Ural expansion expansion”.

The draft summit conclusions say ministers should ensure an “equal playing field” for oil purchases, without saying how it will work.

“We need to make sure we do no more harm to the internal market than benefits,” said an EU diplomat.

Brussels proposed an embargo on the purchase of Russian oil in early May, stressing the EU’s difficulties in finding a way to extend Moscow’s penalties for its war on Ukraine while not harming parts of the European economy that depend on Russian energy supplies. The EU has already imposed sanctions on Russian coal but a gas exemption from sanctions.

Hungary wants a promise that the EU will pay the bill for alternative supplies and its removal from fossil fuels. Last week, Victor Urban, Prime Minister of Hungary, declared He was unwilling to discuss the oil sanctions at the summit on Monday in the absence of a consensus on the matter.

Even with the latest compromise excluding pipeline oil, Hungary will still want alternative supply guarantees in case Druzeba, which passes through Ukraine, is disturbed, allowing it to obtain Russian oil transported by sea, according to diplomats.

Germany also has two refineries that serve the Druze pipeline and take about 50% of what it supplies. Poland takes 16 percent, Slovakia 13.5 percent, Hungary and Slovenia 11 percent and the Czech Republic 9.5 percent. IHS MarkitUnit of S&P Global.

The volumes sent through Druzeva have actually increased since Russia invaded Ukraine, with buyers in the EU looking to take advantage of the big discounts or stock up before any embargo.

Argos, the energy price reporting agency, said that while shipments carried by sea from Russia to Europe fell by 500,000 b / d, Druze shipments rose by 100,000 b / d in April compared to January and are expected to rise again in May. Hungary increased shipments by 65,000 b / d, while Poland imported an additional 130,000 b / d, which helps more than offset declines elsewhere.

One EU diplomat said it was vital to maintain bloc unity and progress on sanctions. “Is there an agreement on an embargo on oil? Yes. Is there an agreement that it will be in two stages? Yes. Is there an agreement on a date? It’s more complicated. We will continue to work on the package.”

Another report by Eleni and Ravitsioti in Athens

EU seeks to close ranks around plan for partial Russian oil ban Source link EU seeks to close ranks around plan for partial Russian oil ban

Related Articles

Back to top button