EU may compensate CEE countries for hit from Russian oil embargo

The European Commission (EC) could channel funds to countries in Central and Eastern Europe (CEE) to help reduce their dependence on Russian fuels, in the wake of Hungary threatening to veto the planned EU embargo on Russian oil imports.

The financial compensation would be disbursed via the new RePowerEU strategy – set to be unveiled next week – which aims to phase out the EU’s reliance on Russia fossil fuels before 2030, Politico reported, citing three EU officials speaking on condition of anonymity.

“The more we can help Hungary with RePowerEU, the faster they can break away from Russian oil,” a senior EU official told the Brussels-based website. 

Last week EC President Ursula von der Leyen announced the EU’s sixth sanction package against Russia, which includes “a complete import ban” on all Russian oil “seaborne and pipeline, crude and refined”.

She pledged that the EU “will phase out Russian supply of crude oil within six months and refined products by the end of the year”. The original deadline to pass the sanctions was set for next Monday, 16 May.

After the EC’s proposal was announced, Hungarian Prime Minister Viktor Orban likened the oil embargo to “nuking” the economy of the landlocked country, and demanded a five-year derogation on threat of vetoing the sanctions package.

Slovakia and Czechia, which are also landlocked, as well as Bulgaria, have also asked for derogations of two or three years. Russia exported 58% and 96% respectively of Hungary’s and Slovakia’s crude oil and oil products in 2021, well over the EU average of 26%.

The EC has been amenable to these CEE countries and von der Leyen even visited Budapest to discuss the matter with Orban on Monday evening.

After her meeting with Hungarian politicians, scheduled at the last minute, von der Leyen tweeted: “This evening’s discussion with PM Viktor Orban was helpful to clarify issues related to sanctions and energy security.”

However on Wednesday Hungarian Foreign Affairs and Trade Minister Peter Szijjarto said in a video on Facebook that talks have so far shown that “Brussels has no solutions” and “Hungary will therefore maintain its stance that sanctions on Russian oil may only pertain to maritime routes.”

The proposal would “completely demolish” Hungary’s currently stable energy security, according to Szijjarto.

“We are expecting a proposal not only for the reconstruction of our refineries for hundreds of millions of dollars, not only for increasing the capacity of the oil pipeline from Croatia to Hungary for hundreds of millions of dollars, but also for the future of the Hungarian economy,” Szijjarto added.

Hungarian business website Privatbankar commented that “there are signs that Hungary does not want to ban Russian oil in the long term”.

The US government does not want to interfere in the dispute between Hungary and the European Commission on the embargo, US President Joe Biden’s energy security adviser told Hungarian website 444 on Wednesday.

The US deems the embargo a European issue and acknowledged that some EU countries may need a period of transition, Amos Hochstein said.