EU reputation at stake as Hungary continues to block Russia sanctions

Ukraine's Foreign Minister Dmytro Kuleba (C) and Canadian Foreign Minister Melanie Joly with EU's chief diplomat Josep Borrell (R) ahead the second part of a meeting of EU foreign ministers at the European Council, in Brussels, Belgium, 16 May 2022. [EPA-EFE/STEPHANIE LECOCQ]

The EU has not found consensus on the new sanction package against Russia and an agreement could be still ‘a week or two’ away, EU’s chief diplomat Josep Borrell said on Monday (16 May), as Hungary said it would not lift its veto.

“Unhappily, it has not been possible to reach an agreement today,” Borrell told reporters after a meeting of the bloc’s foreign ministers in Brussels.

The EU side has offered Hungary, the Czech Republic and Slovakia long grace periods to phase out Russian oil imports, but that has not yet convinced Budapest to lift its opposition.

The philosophy of EU sanctions is that they should hit the third country, in this case Russia, rather than causing harm tor the member states. But sanctions in the field of energy inevitably cause damage to EU countries, some being hit more than others.

The EU’s Russian energy imports were worth €99 billion in 2021, Russian oil accounting for about 27% of EU oil imports.

Technically, oil imports from Russia are easier to be replaced than gas imports, however rising oil prices already add to inflation across the EU.

“I hope it’s not going to last more, but I cannot tell you if it’s going to take one week or two,” Borrell said, adding that he had initially aimed for ministers to discuss the sanctions package on Monday.

Borrell explained that the main obstacle to a deal was of economic nature: “Hungary has not explained their position in political terms, but in economic terms,” he said.

EU member states are increasingly desperate to avoid the appearance of division in the face of the Kremlin’s onslaught on Ukraine, and officials are scrambling behind the scenes to patch up a compromise with Hungary after making the initial proposal nearly two weeks ago on 4 May.

EU officials have made a series of concessions to member states since then, including dropping a plan to ban EU ships from transporting Russian oil, after opposition from Greece and Cyprus over the potential economic impact on their industries.

Some member states have also floated the idea of considering delaying the ban on oil to proceed with the rest of the sanctions package, but this has been opposed so far since it is believed that the measures would ‘lack teeth’ without the energy component.

EU ambassadors are set to meet for their regular meeting on Wednesday, where a more detailed discussion on the package is expected.

However, EU diplomats and some foreign ministers on Monday have said they rather consider the possibility that the discussion might drag on until an informal EU summit scheduled for the end of May.

Hungary also had hinted before that anything close to an oil ban would rather be Chefsache, meaning it would have to be discussed among EU leaders rather than on the lower political level.

“The risk here is that we will have ‘discussion on everything’ between EU leaders, from sanctions to energy to enlargement to treaty change, which can blow up depending on how annoyed member states are by that point in time,” one EU diplomat quipped.

Borrell said foreign ministers had decided, however, to provide an additional €500 million for arms purchases in support of Kyiv, taking the total sum of money the EU has earmarked for that purpose to €2 billion.

Holding the EU hostage 

Hungary has been accused of “holding the EU hostage” over its refusal to agree an oil embargo against Russia, as the bloc struggles to reach a consensus on its latest sanctions aimed at eroding the Kremlin’s ability to wage war.

“The whole union is being held hostage by one member state who cannot help us find the consensus,” Lithuanian Foreign Minister Gabrielius Landsbergis told reporters.

“Everybody expected this will be enough,” Landsbergis said, reflecting the widespread conviction amongst his counterparts that Hungary would fall into line if it got more time to convert its energy system to accommodate non-Russian oil.

Hungarian Prime Minister Viktor Orbán has likened the economic impact on his country of banning Russian oil to a “nuclear bomb.”

Budapest says it needs time to adapt its energy systems and financial support to pay for updated infrastructure and more expensive alternatives to Russian oil.

Hungary, often the odd one out in EU decision-making, has demanded to be exempted from the embargo for at least four years and wants €800 million in EU funds to re-tool a refinery and boost the capacity of a pipeline to Croatia.

Foreign Minister Péter Szijjártó on Monday appeared to up the price tag for ditching Russian oil by saying it would cost 15 to 18 billion to prepare its economy for the move.

“It is legitimate for Hungarians to expect a proposal” from the European Commission to cushion that blow, Szijjártó said in comments broadcast on his Facebook page.

“A complete modernisation of the Hungarian energy infrastructure is needed to the scale of 15 to €18 billion.”

The protracted dispute over the oil embargo has led some EU diplomats to believe achieving a ban on Russian natural gas is beyond reach.

The EU plans to cut its reliance on Russian gas by two thirds this year, for which an according proposal is set to be presented by the European Commission on Wednesday (18 May), but it has been reluctant to halt imports as Germany opposes such a move.

‘Reputation at stake’

Ukraine’s foreign minister Dmytro Kuleba urged the EU on Monday to overcome Hungary’s resistance to an embargo on Russian oil and then look to “kill” all of Moscow’s exports to starve its war machine of funds.

“We are unhappy with the fact that the oil embargo is not there,” Kuleba said after meeting EU foreign ministers in Brussels.

“It’s clear who’s holding up the issue. But time is running out because every day Russia keeps making money and investing this money into the war.”

Kuleba said he was convinced the oil embargo would come and “the only question is when and what will be the price that the European Union will have to pay to make it happen.”

“There is an understanding among EU member states that it is the reputation of the European Union that is at stake”, Kuleba said. 

He then called on the 27-nation bloc to move on to a seventh package of sanctions that would “kill Russian exports” and deliver a crushing blow to President Vladimir Putin’s coffers.

Orbán is known as Putin’s best friend in the EU. According to unconfirmed reports, Putin gave Orbán advanced notice ahead of the invasion of Ukraine, and the Hungarian strongman told him that his country was interested in taking part of Ukraine’s territory after the war.

According to analysts, Russia has been counting on internal EU divisions to evade major sanctions for its invasion of Ukraine.

Orbán was officially re-elected as Prime minister on Monday and received congratulations both from Council President Charles Michel and Commission President Ursula von der Leyen.

(Edited by Georgi Gotev)

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