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Oil embargo: How Orban bought time for Kremlin and what will happen to gas

The Page collage

The Page collage

Hungary has bought time for Russia, but the oil embargo will still hit the Kremlin

The new agreement reached by EU leaders on the sixth round of sanctions against Russia will cover about 75% of Russian oil imports, with Hungary getting all or almost all it wanted for itself.

Simultaneously buying time to reach an agreement and playing into the hands of the Kremlin. It should also be understood that Russian gas is not yet discussed in the sixth package, but this issue may be revisited in the seventh one.

The Page looked into the details of the agreement and the reaction of Kyiv, Moscow, and Budapest to it.


Concession for Orban through "Druzhba"

Photo: Wikipedia

Photo: Wikipedia

The agreement's coverage of about 75% of oil imports from the terrorist country will cut off a major source of financing for the Russian military machine, European Council President Charles Michel assures.

Quote"The sanctions will immediately impact 75% of Russian oil imports. And by the end of the year, 90% of the Russian oil imported in Europe will be banned," he stresses.

As The Guardian clarifies, is banning seaborne oil immediately, which covers about two-thirds of Russian imports to the EU.

At the same time, oil transported through the critical oil pipeline Druzhba ("friendship") will be exempt from the ban, a key concession to Hungary, which is heavily dependent on Russian oil and has been blocking the sixth package of sanctions for the past month, demanding 15-18 billion euros of investment and 5 years without an embargo.

But even with such a compromise, oil prices will remain high and will have an impact on the EU economy, experts warn.

Complete oil embargo and Kyiv’s reaction

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The EU says that up to 90% of Russian oil flows will cease before the end of the year, since Germany and Poland, the countries of the Druzhba’s northern branch, have promised to waive its supplies.

As for the complete oil embargo, there is no answer to the question "when" yet. European Commission President Ursula von der Leyen assures that the EU will work on how to close the loophole "as soon as possible".

But this "as soon as possible" could drag on for a long time: in addition to Hungary's demands for restructuring the oil and gas system, Croatia needs time to increase supplies through the Adria gas pipeline. Slovakia and the Czech Republic will get several years of respite in order to adapt to new realities.

Kyiv reacted to the EU agreement rather restrainedly, noting that the latest decision had been made late and it was not enough.

Quote"If you ask me, I would say far too slow, far too late and definitely not enough," Ihor Zhovkva, deputy head of President Volodymyr Zelenskiy's office, told Reuters.

Orban's joy: "We have protected families"

Photo: facebook.com/orbanviktor

Photo: facebook.com/orbanviktor

Although many politicians in Europe sympathized with Hungary, which is so dependent on oil and gas from Russia, a number of diplomats expressed the opinion that Orban was taking revenge on the EU with his actions.

The thing is that due to imperfect legislation and the offensive on democracy inside Hungary, Budapest was blocked from getting funds for economic recovery after the COVID-19 pandemic, and there were also threats to limit the flow of fixed assets from Brussels.

Orban himself sees the Druzhba compromise as his own victory, and in a video message to the nation has already told Hungarians that they can sleep peacefully as their families are protected from the high heating costs that the embargo would entail for the rest of Europe.

Quote"Families can sleep peacefully tonight — we have managed to avoid the most hair-raising idea," the Hungarian Prime Minister stressed.

A frankly pro-Orban newspaper in Budpest even came out with the headline:

Quote"Viktor Orban: We have protected Hungarian families!"

Russia threatens to cut off oil sooner

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Of course, the new package of sanctions will have a significant impact on how much money Russia will get from the EU daily: this is an amount of about 1 billion euros per day for oil and gas.

In the long run, according to The Guardian, the new restrictions will exacerbate Russia's economic problems, however, the time stalled by Budapest gave the Kremlin the opportunity to find alternative buyers.

This is exactly what Mikhail Ulyanov, Russia's permanent representative in Vienna, wrote on Twitter in response to the news about the oil agreement:

Quote"Russia will find other importers."

At the same time, he quoted Ursula von der Leyen, who was also fearing this, and gloated that the EU was not in very good shape now, as sanctions would hit Europe as well.

In one of the subsequent tweets, Ulyanov suggested cutting off Europe, so eager to cut off Russian oil supplies by the end of 2022, from them in advance.

Quote"Why can’t Russia meet European aspirations much earlier as a friendly gesture?" joked the bloody regime representative.

How Russia’s military machine to suffer

Photo: twitter.com/amb_ulyanov

Photo: twitter.com/amb_ulyanov

Despite that this agreement is a compromise one, it is very important because, according to Wednesday Group, due to rising prices, Moscow continues to earn from selling fossil fuels about the same amount as before the invasion, The Washington Post writes.

While Russia has had time to find new buyers, it will be difficult to find countries with enough appetite to offset revenue from the EU.

Reconfiguring its energy export system will take time and money, and the risk of sanctions for countries (or personal bans from large companies) that buy oil from the Kremlin will also remain a problem.

Edward Gardner, a commodities economist at Capital Economics in London, said he expects Russian exports to fall about 20% by the end of 2022.

Gas surprise in the seventh package?

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The oil embargo, let us recall, is only part of the EU’s sixth round. The new package of sanctions also provides for:

  • disconnecting Sberbank and other Russian banks from SWIFT;
  • a ban on three Russian state broadcasters from operating in the EU;
  • new individual sanctions against top Kremlin officials associated with war crimes in Ukraine.

After reaching this agreement, the European Union plans to consider a possible seventh package that will include a gas embargo.

Before invading Ukraine on February 24, 2022, Russia supplied 40% of gas to the EU, but now this figure has decreased — both because of cutting off Bulgaria, Poland, and Finland by Moscow itself, and because most countries are independently working to diversify supplies.

Although the question of Europe's energy independence from the Kremlin, which uses its fuel as a weapon, has long been relevant, negotiations on this matter promise to be more difficult than negotiations on oil.


Conclusions for Ukraine

If we think rationally, the EU decision is good news for Kyiv, because even stopping the purchase of 75% of oil from Russia and 90% by the end of the year will force the Kremlin to sell oil to other markets, perhaps at significant discounts, as was the case with India. Europe and the U.S., for their part, can put pressure on countries and companies that buy bloody fuel and help diversify supplies.

Nevertheless, Orban gave Russia time to negotiate and search for new buyers, the Druzhba pipeline will remain open, and the Kremlin machine will continue to obtain, albeit cut ones, but revenues.

We should not forget about gas, the negotiations on the embargo on supplying it may drag on until autumn, if not until 2023. All this, of course, complicates Ukraine's struggle to restore its borders and increases Russia's ability to attack our lands for longer. However, we should admit that the EU has taken a significant step forward, albeit a compromise one.


Context.

  • Earlier, we reported about the results of three months of the war in Ukraine and explained why the West was no longer building a golden ladder for Putin.
  • The Page also reported that the European Parliament had demanded the exclusion of the Russian Federation from the G20 and a complete embargo on Russian energy resources.


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