Hungary lifts its embargo on Russian oil after Orbán speaks out

EU leaders gave Budapest a pass in order to get support for fresh penalties.

In their struggle against Russia's conflict in Ukraine, EU leaders capitulated to Hungarian Prime Minister Viktor Orbán's requests, allowing Budapest near-total immunity from a new Russian oil embargo.

The collective capitulation to Orbán, who had spent 26 days obstructing the proposed ban, allowed EU heads of state and government to declare victory late Monday night in adopting a sixth package of sanctions to punish Moscow for invading its neighbour, sparing Brussels the humiliation of failing to enact the much-touted embargo.

At the same time, authorities and diplomats acknowledged that Orbán, the EU's authoritarian leader, had gotten his way, placing Hungary's interests ahead of the drive to destabilise Russian President Vladimir Putin.

“If you look at the whole month affair,” an EU diplomat said of Orbán’s obstruction efforts, “yes, he got a lot — and kept everyone hostage.”

On Facebook, Orbán released a quick triumphant statement: “An agreement was reached. Hungary is exempt from the oil embargo!”

According to European Council President Charles Michel and other top officials, the embargo would block 90% of Russian oil supplies to EU members by the end of the year, depriving the Kremlin of vital cash to pay the war.

Other harsh sanctions included in the package include the exclusion of Sberbank, Russia's largest consumer bank, from the SWIFT international payment system. The latest sanctions also target Patriarch Kirill, the leader of the Russian Orthodox Church and a close Putin friend who has given the conflict a religious imprimatur, as well as Russian military leaders guilty for crimes in Bucha and other Russian-occupied towns.

The proposals must yet be translated into legal language and approved by the EU Council, which officials predicted would happen later this week.

“We want to put a stop to the Russian war machine, and stop financing for Russian military capacity,” Michel said early Tuesday morning at a news conference, where he was joined by Commission President Ursula von der Leyen.

Von der Leyen, who came to Budapest to negotiate with Orbán and whose office oversaw most of the process, predicted last week that leaders of state and government would be unable to achieve an agreement at this week's meeting. She was pleased that things had turned out differently.

“I am very glad that the leaders were able to agree in principle on the sixth sanctions package,” von der Leyen said at the news conference. “Thanks to this, Council should now be able to finalize a ban on almost 90 percent of all Russian oil imports by the end of the year.”

She also stated that the new penalties would bar EU corporations from insuring or reinsuring Russian ships and would halt broadcasting in the EU of three Russian-controlled media outlets that were being used to propagate Kremlin propaganda.

Michel, von der Leyen, and several national leaders requested that the European Council examine Hungary's most crucial exception - authorization for Russian oil to continue flowing via the southern segment of the Druzhba pipeline — "as soon as feasible." Dutch Prime Minister Mark Rutte even stated that leaders of state and government will revisit the issue at their next summit, scheduled at the end of June.

However, for all practical purposes, the exemption is limitless.

Northern line shutdown

Although the exclusion theoretically applies to all pipeline oil, authorities stated that Germany and Poland had voluntarily decided to suspend all imports of Russian oil by the end of the year, thereby cutting off supply from the northern part of the Druzhba pipeline.

According to Michel, the overall consequence would be a rather rapid restriction on around 70% of Russian oil supplies to the EU, with almost 90% cut off by the end of the year. Even as he welcomed the accord as an accomplishment, he noted the difficult hurdles that EU members experienced in reaching the agreement.

“We don’t underestimate all the difficulties,” Michel said at the news conference. “We know that we needed a few weeks before we were able to take such a decision. But I think it’s a very strong signal that we sent today because the recent hours, the recent days, there were speculations about the risk for a lack of unity, of European Union unity.”

Michel continued, “I think that more than ever, it’s important to show that we are able to be strong, that we are able to be firm, that we are able to be tough in order to be able to defend our values, to defend our interests.”

Officials stated that they would seek to enhance infrastructure so that Hungary could obtain more oil via an alternate route from Croatia, at which point Budapest's exemption could be phased away.

When questioned about the fairness of one EU country effectively not participating in the ban, officials insisted that Hungary faced special "security of supply" issues because it lacks seaports, making tanker deliveries impossible, and because the southern Druzhba pipeline runs through Ukraine, making it vulnerable to sabotage or damage from the war.

To accommodate for this aspect, EU leaders decided in their written conclusions that "in the event of unexpected disruptions in supply, emergency measures will be implemented to assure supply security." That implies Hungary could buy more oil if its usual pipeline supplies were shut off.

Even in the absence of Hungary's insistence, the embargo was intended to allow nations that have long relied on Russian oil imports time to react. Crude oil products will be phased out within six months, while refined goods will be phased out by the end of the year.

Hungary was not the only country to oppose, but it was the most vehement in its demands. Slovakia and Bulgaria have also asked for concessions. The Czech Republic was given an 18-month exemption from an oil sales restriction.

The tortuous process of achieving a political agreement on the embargo underscored the EU's growing difficulty in penalising Russia for the conflict. Von der Leyen originally announced the oil embargo in a speech to the European Parliament on May 4, predicting that it would be implemented within days. It took nearly a month instead.

According to officials and diplomats, halting EU purchases of Russian natural gas will be far more difficult. However, Michel stated that EU heads of state and government were determined to achieving their vow to decrease their decades-long dependency on Russian energy, which was made at a meeting in Versailles in March.

Rutte stated that leaders will approach the next round of sanctions differently in order to avoid being trapped. “Myself and others pleaded tonight that when we work on the seventh package," Rutte said. "We should have an upfront debate about all the technicalities before we start to discuss what actual sanctions would look like.”

By fLEXI tEAM