EU leaders agree to pursue ban on bulk of Russian oil

BRUSSELS • European Union leaders agreed to pursue a partial ban on Russian oil, paving the way for a sixth package of sanctions to punish Russia and President Vladimir Putin for the invasion of Ukraine.

The sanctions would forbid the purchase of crude oil and petroleum products from Russia delivered to member states by sea, but include a temporary exemption for pipeline crude, European Council president Charles Michel said late on Monday during a summit in Brussels.

"This immediately covers more than two-thirds of oil imports from Russia, cutting a huge source of financing for its war machine," Mr Michel said in a tweet. "Maximum pressure on Russia to end the war."

Officials and diplomats still have to agree on the technical details, and the sanctions must be formally adopted by all 27 EU nations. Mr Michel said ambassadors would meet today.

Hungary, which will continue to receive Russian oil via pipeline, had been blocking an embargo for the past month as it sought assurances that its energy supplies would not be disrupted.

Hungarian Prime Minister Viktor Orban yesterday hailed the exemption that allowed his country to keep receiving cheap crude from Moscow.

"Families can sleep peacefully tonight, we kept out the most hair-raising idea," he said in a video message posted on his Facebook page. "We have reached an agreement that states that countries that receive oil through pipelines can continue to operate their economies under the previous conditions."

The European Commission has proposed to ban seaborne crude oil six months after the adoption of the sanctions, while refined petroleum products would be halted in eight months, according to people familiar with the most recent version of the proposal.

Shipments of oil through the giant Druzhba pipeline to central Europe will be spared until a technical solution is found that satisfies the energy needs of Hungary and other landlocked nations.

The bulk of the current pipeline deliveries is to Germany and Poland, which have signalled that they will wean themselves off Russian supplies regardless of any EU action. Berlin committed in writing to stick to that pledge on Monday. If both countries follow through, the total effect, along with seaborne embargo, would be to cut 90 per cent of Russian crude oil sales to the EU by the year-end.

"We should be able to soon return to the issue of the remaining 10 per cent of pipeline oil," European Commission president Ursula von der Leyen said yesterday.

Seaborne supplies account for about two-thirds of Russian oil imports, and once in place, the measure would cost Mr Putin up to US$10 billion (S$13.7 billion) a year in lost export revenue, according to Bloomberg's calculations.

That is because the ban would force Russia to sell its crude at a discount to Asia, where it is already changing hands at about US$34 a barrel cheaper than the price of Brent futures.

The package also proposes a ban on insurance related to shipping oil to third countries, but it will not take effect until six months after the adoption of the measures, from the previously proposed three-month transition. That adds to a longer list of concessions since the proposal was originally put forward by the EU's executive arm last month.

The EU's efforts to limit price spikes and Russia's ability to divert its oil exports in the event of a European embargo had already been watered down in earlier negotiation rounds after a plan to ban tankers from transporting oil to third countries was abandoned.

Some countries will also have a longer transition for the seaborne oil ban. For Bulgaria, a period until June or December 2024 is envisioned, while Croatia could get an exemption for imports of vacuum gas oil, which is used to make products including petrol and butane.

Russia delivered about 720,000 barrels of crude a day to European refineries through its main pipeline to the region last year. That compares with seaborne volumes of 1.57 million barrels a day from its Baltic, Black Sea and Arctic ports.

BLOOMBERG, AGENCE FRANCE-PRESSE