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E.U. close to deal on Russian oil phaseout; Hungary, Slovakia object

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BRUSSELS — The European Union is close to a deal on phasing out Russian oil imports in response to the war in Ukraine — but objections from Hungary and Slovakia are holding up a sanctions agreement, according to two E.U. diplomats and an E.U. official.

To seal the deal, the E.U. may grant the two countries exemptions, the officials said, speaking on the condition of anonymity to discuss private negotiations while details are still being hammered out.

Talks gained momentum last week after a major holdout, Germany, softened its opposition and signaled support for a ban in phases. Over the weekend, officials and diplomats in Brussels discussed the idea of a phaseout by the end of 2022, but Hungary and Slovakia pushed back, according to the diplomats and the official.

The European Commission is preparing the proposal on oil as part of its sixth round of sanctions on Russia over the war. A draft is expected to be circulated to member states on Tuesday and debated by E.U. ambassadors on Wednesday, with a formal agreement possible this week.

Russia cuts off gas to Poland, Bulgaria, stoking tensions with E.U.

The talks on oil played out in parallel to an emergency meeting of E.U. energy ministers in Brussels, called after Russia deployed one of its most powerful economic weapons by shutting off natural gas to Poland and Bulgaria.

The energy ministers focused Monday on finding ways to ensure that Poland and Bulgaria continue to have enough gas from other sources and to prepare for possible shutdowns in other countries. E.U. officials denounced the shut-offs by Russia’s Gazprom as “blackmail.”

“Energy efficiency, the fast growth of renewables and E.U. coordination of energy policies must progress quickly,” Robert Habeck, Germany’s economy and climate protection minister, told reporters in Brussels on Monday.

“All the work we are doing right now is to no longer be dependent on Russian gas,” said Barbara Pompili, French minister of ecological transition, ahead of the talks.

The E.U. is not ready for a gas embargo, but it imposed a ban on Russian coal after the massacre in the Ukrainian town of Bucha. And the high probability of an agreement on oil underscores how much the war in Ukraine has forced Europe to rethink its reliance on Russian energy.

In 2020, the bloc imported about 35 percent of its oil, 40 percent of its natural gas and just under 20 percent of its coal from Russia, according to the E.U. statistics office.

Bucha massacre tests Europe’s red lines on Russian energy

Baltic nations and some Central European countries — though not Hungary — have called for a total energy embargo, arguing that buying Russian fossil fuels amounts to funding war crimes. Others, notably Germany and Austria, have been reluctant, worried about the economic impact of supply disruptions.

Slowly, the holdouts have come around. Austria will support the commission’s phaseout proposal, Energy Minister Leonore Gewessler said Monday.

Germany said last week that it was working to cut its reliance by finding new suppliers. Before the invasion, the country imported 35 percent of its oil from Moscow. Now that is down to 12 percent, according to German officials.

Germany’s Habeck said a new assessment shows “Germany can bear an oil embargo” as it weans itself from Russia oil by late summer. Germany had previously aimed to stop its imports by the year’s end.

He also said the fact that other E.U. members have not reached the same stage of energy diversification “must be respected.”

Russian threats redraw the global energy map

Hungary and Slovakia remain heavily dependent on Russian oil and say they need more time and money to adjust, particularly to update their oil infrastructure.

Hungary’s objection is also raising eyebrows in Brussels, because of Prime Minister Viktor Orban’s close ties to Russian President Vladimir Putin and Budapest’s ongoing standoff with the E.U.

Orban has walked a fine line on Russia’s war in Ukraine, criticizing the invasion and backing the E.U. on some issues, while frustrating efforts to impose sanctions on Russian energy and refusing to send military aid to Ukraine.

Putin has decreed that “unfriendly countries” must pay for gas contracts in rubles — a demand the E.U. has said it will oppose. But Hungary broke ranks, saying it will indeed pay in Russian currency.

Diplomats will be watching to see what concessions Orban’s government is granted and whether he tries to use the matter to pressure the European Commission. The E.U. has frozen Hungary’s pandemic recovery funds over rule-of-law breaches and last week triggered a mechanism that could result in the bloc holding back additional subsidies.

“Objectively, [Hungary is] in a more difficult position than others. At the same time, they would still like to get their hands on the recovery money,” one of the E.U. diplomats said.

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