EU proposes a ban on Russian oil imports for this year. Hungary says no | CNN Business

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CNN Business

The European Union is proposing to ban all oil imports from Russia by the end of this year and remove the country’s largest bank, Sberbank, from the international payment network SWIFT.

But the plan was immediately met with opposition from EU countries that wanted a longer transition period, including Hungary, which has reportedly already been offered an extra year to dump Russian oil.

“The shortest period, we’ve been clear about that, our oil companies have been clear about that, is three to five years,” Zoltan Kovacs, spokesman for Prime Minister Viktor Orban, told CNN’s Eleni Giokos.

European Commission President Ursula von der Leyen said earlier Wednesday the measures would be part of a sixth round of sanctions against Russia over its invasion of Ukraine.

“We are now proposing a ban on Russian oil,” she said during a speech to the European Parliament. “Let’s be clear: it’s not going to be easy. But we just have to work on it. We will ensure that we phase out Russian oil in an orderly manner, to maximize pressure on Russia while minimizing the impact on our own economies.”

Crude oil supplies would be halted within six months and refined oil product imports by the end of 2022, she added.

News of the proposal pushed crude oil prices up about 4%. Brent, the global benchmark, was trading near $109 a barrel, while US oil futures were above $106 a barrel at 12:30 p.m. ET.

Oil prices have risen about 40% since the start of the year on fears that the Russian invasion of Ukraine will cause a supply shock, fuel inflation and put pressure on European economies.

EU countries have already agreed to phase out Russian coal imports, but despite weeks of negotiations, the bloc has found it much more difficult to agree on an oil embargo.

Hungary said it could not support the proposal in its current form because it was concerned about what it would mean for the country’s energy security. According to the International Energy Agency, nearly 60% of oil imported by 2021 came from Russia.

“The essence of decision-making in Europe is consensus,” Kovacs said. “We have told Brussels and all European states that it simply cannot be done on behalf of Hungary as they require.”

Slovakia – which got 92% of its oil imports from Russia last year – and the Czech Republic have also aimed for longer transition periods than those envisaged in the EU plan, Reuters reported.

Russia is the world’s second largest exporter of crude oil, accounting for about 27% of EU oil imports last year. The United States, Canada, the United Kingdom and Australia have already banned imports.

Those sanctions — and a de-facto embargo by some European oil refiners and traders — have hit the price of Russian oil. Its benchmark Ural crude now trades at a discount of $35 a barrel against Brent, compared to less than $1 before the invasion.

Some customers in Asia are reportedly buying more Russian oil, but not in enough quantities to make up for the loss of Western buyers.

“Russia’s ability to divert all unwanted cargoes from the West to Asia is limited, meaning that, in the event of embargoes, Russia will be forced to further reduce production as it lacks storage capacity for additional raw volumes. Rystad Energy analysts wrote in a research report Monday.

The International Energy Agency recently estimated that Russia’s oil supply would fall by 1.5 million barrels per day in April if demand falters, and those losses are set to accelerate to 3 million barrels per day this month.

But the rise in world oil and natural gas prices means Moscow continues to earn huge amounts of money from its energy exports. Rystad estimates that Russia will collect more than $180 billion in energy tax revenues this year – a 45% increase from 2021 – despite the cuts in oil production.

Western countries continue to look for other ways to make it harder for Russian President Vladimir Putin to fund his war effort. Von der Leyen said the EU is proposing to remove Sberbank (SBRCY) and two other major banks from the SWIFT system, the secure network more than 11,000 financial institutions use to send messages and payment orders.

Sberbank is the largest bank in Russia.

The Society for Worldwide Interbank Financial Telecommunication, based in Belgium, must comply with EU regulations. Because there is no globally accepted alternative, it is essential for global financing.

“We have hit banks that are systemically critical to the Russian financial system and Putin’s ability to destroy,” von der Leyen said. “This will reinforce the complete isolation of the Russian financial sector from the global system.”

Three major Russian state broadcasters will also be banned from European airwaves.

— Anna Cooban and Julia Horowitz contributed to this article.



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