Russia is the world’s largest exporter of oil to global markets and the second-largest exporter of crude oil after Saudi Arabia, exporting 2.85 million barrels per day by sea and through pipelines. Countries in Europe are the largest collective buyers of that oil, while China is the largest single purchaser of Russian oil. For many countries in Europe, Russian oil and natural gas are the vital sources of power and heat. Russian oil is also the dominant source of gasoline and other refined petroleum products.
After leaders reached an agreement on Monday, EU ambassadors met on Wednesday to review the legislative wording of the sixth round of penalties, which includes a restriction on Russian oil imports. A substantial concession to Hungary was included in the framework agreement, including a temporary exemption for crude oil supplied by pipeline. While leaders congratulated themselves on reaching an agreement after weeks of stagnation, the detailed discussions over the legal wording encountered a snag. Hungary protested the plan to censure the head of the Russian Orthodox Church, a close friend of Putin, at the summit on Wednesday.
Hungary’s Dependence on Russia
Hungary, a close ally of Russia, sought an exception from the EU’s proposed ban on Russian oil imports, citing its reliance on Russian oil as making compliance impossible. Hungarian Foreign Minister Peter Szijjarto said: “This package of sanctions will completely destroy the security of Hungary’s energy supply.” He claimed that his country was reliant on Russian oil imported through pipes already in place. While the EU declared that the sanctions will restrict Russian oil exports to the EU by 90% by the end of the year, Hungary opposed the action due to Krill's blacklisting.
What is the Sanction About?
Discussions on oil embargo began at the start of the month, but no tangible progress was made. The proposed sanctions on oil imports would be part of the EU’s sixth round of sanctions on Russia since the beginning of the Russia-Ukraine conflict. Restricted access to capital markets, the freezing of Russia's central bank assets, the exclusion of Russian financial institutions from SWIFT, and the prohibition of imports of Russian coal and other commodities were included in the five previous rounds of sanctions. The new sanctions would also bar EU corporations from insuring or reinsuring Russian ships, and prohibiting three Russian-controlled media outlets from airing programs in the EU and spreading Kremlin propaganda.
Outlook
On Monday afternoon, oil prices surged as investors watched for signs that the world's largest trade bloc would agree to impose an embargo on Russian oil imports. Energy prices, which were already high at the start of the year, soared since the commencement of the Russia-Ukraine conflict. It remains to be seen whether these sanctions will have an immediate impact on Russia or whether applying exorbitant tariffs would have been more effective.
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