EU to discuss watered-down oil embargo on Russia as Hungary holds firm

The European Union on Monday will continue to work toward an agreement to embargo Russian oil after attempts to do so on Sunday failed.

The talks are largely held up by Hungary, a major user of Russian oil and whose leader Viktor Orban is on friendly terms with Russia’s Vladimir Putin.

Budapest over the weekend signaled support for a European Commission proposal that would apply sanctions only on Russian oil brought into the EU by tankers, which would allow landlocked energy importers Hungary, Slovakia and the Czech Republic to continue to receive their Russian oil via pipeline until alternative sources can be found. Talks were held up however by demands from Hungary for EU financing.

A spokesperson for the European Commission, the EU’s executive arm, declined to comment on the ongoing proposals.

The proposed sanctions on oil imports would be part of the EU’s sixth sanctions package on Russia since it invaded Ukraine in late February.

Roughly 36% of the EU’s oil imports come from Russia. Energy prices, already high at the start of this year, have skyrocketed since Putin launched the war against Ukraine.

Oil prices rose on Monday as market participants closely monitored the prospect of the world’s largest trading bloc agreeing to impose a ban on Russian oil imports.

International benchmark Brent crude futures traded 0.8% higher at $120.41 a barrel in London, while U.S. West Texas Intermediate futures traded 0.9% higher at $116.15.

“Given that Russia is a major producer and exporter of crude oil and refined products an embargo on sales would cause significant financial pain,” said Tamas Varga of oil broker PVM.

“On the other hand, in the absence of firm additional retaliatory measures, the EU still finances Russia in the conflict. In the first three months of the war, it acquired energy in the value of $60 billion, hardly a recipe to cause financial strain for the invader,” Varga said.

“This much the EU admits itself. What is under serious discussion is whether sanctions are the best way to punish Russia or [whether] imposing tariffs would be more effective,” he added.