EU pushes for Russian oil embargo as string of nations seek exemptions

Hungary, Czech Republic and Slovakia could delay or derail plans for import ban

European Commission President Ursula von der Leyen announced the sixth sanctions package on Wednesday. EPA

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The European Union is proposing a ban on Russian oil in a sixth round of sanctions over Ukraine, setting up a tug-of-war between countries eager to punish Moscow and import-reliant neighbours reluctant to worsen Europe's energy crisis.

European Commission President Ursula von der Leyen said the proposed embargo would ban the import of crude oil within six months and of refined products by the end of the year.

But her proposal will need approval from all the EU's 27 member states, which is no certainty. Hungary, Slovakia and the Czech Republic have said their economies are too reliant on Russian crude to take part in such a ban immediately, raising the possibility of opt-outs for certain countries.

"Let's be clear, it will not be easy," Ms von der Leyen told the European Parliament after Russian forces pounded targets in the far west of Ukraine, close to the EU border. "But we simply have to do it."

The price of Brent crude rose around 3 per cent to more than $108 a barrel. It came as inflation in the rich-world OECD area rose to 8.8 per cent in monthly figures, driven by spiralling energy costs.

Although there is a broad EU consensus around the long-term goal of ditching Russia as an energy supplier, supporters of an embargo say this must happen urgently to stop Europe effectively financing the onslaught on Ukraine.

Ms von der Leyen said the phase-in of an oil ban would allow time to find alternatives and "maximise the pressure on Russia while... we minimise the collateral damage to us" at a time when fuel prices are already soaring.

Hungarian government spokesman Zoltan Kovacs said ministers there opposed the embargo and did not see "any plans or guarantees on how a transition could be managed... and how Hungary's energy security would be guaranteed".

"The economy cannot be fuelled, vehicles driven, or homes heated by ideology," he said, while Foreign Minister Peter Szijjarto said Hungary could not support the sanctions "in this form".

Slovakian broadcasters quoted Economy Minister Richard Sulik as saying he was seeking a three-year postponement while it arranges alternative supplies. But he distanced the country from Hungary and its Russia-friendly leader Viktor Orban, saying it was "rude, incorrect and untrue" to lump them together.

Czech Prime Minister Petr Fiala meanwhile said his landlocked country would support the embargo if it came with a two to three-year grace period to replace supplies that come through the Druzhba pipeline.

Individual countries could receive special treatment if the other EU members are willing to go along with it. Bulgaria indicated it too would like an exemption if they are available, although it said it could live without Russian crude if necessary.

Sixth package

The package unveiled on Wednesday also includes proposals to cut more Russian banks out of international payments system Swift and to penalise high-ranking military officers blamed for atrocities in Bucha, near Kyiv.

The three banks set to be sanctioned include Sberbank, Russia's largest, and were described by Ms von der Leyen as "systemically critical to the Russian financial system and Putin's ability to wage destruction".

Three Russian state-owned broadcasters will also be banned from EU airwaves in a move against what Ms von der Leyen called "mouthpieces that amplify Putin's lies and propaganda" about the 10-week invasion.

A draft text leaked to AFP suggested the list of sanctioned individuals would be expanded to include the head of the Russian Orthodox Church as well as relatives of Kremlin spokesman Dmitry Peskov. Diplomats were expected to start negotiations on the package on Wednesday.

But the energy sanctions are the most contentious part of a package which supporters say is needed because earlier measures against the financial and industrial sectors, and prominent figures in the Kremlin's inner circle, failed to persuade Russia to call off the invasion.

An oil ban would cut off both the Druzhba pipeline that runs through Poland, Germany, the Czech Republic, Slovakia and Hungary as well as barrels shipped from Russia's Baltic and Black Sea ports.

Supporters of an oil embargo have been arguing for weeks that a ban is necessary to cut off one of the Kremlin's most lucrative sources of funding and that the five previous rounds of sanctions have failed to hit their target.

But the race to ditch Russian fossil fuels was given extra urgency last week by Gazprom's move to cut off gas supplies from EU members Poland and Bulgaria, underscoring the Kremlin's grip over the EU's power grid.

A Russian-owned oil refinery in Germany, which says it will no longer stand in the way of an embargo. AP

Germany and Austria, who initially opposed an oil ban, have said they would no longer stand in the way after making progress on diversifying their power grids.

German Vice-Chancellor Robert Habeck said the EU's proposal left ample time to work out what to do with a Russian-owned oil refinery near Poland, which is responsible for most of the remaining 12 per cent of the country's oil that derives from Russia.

But Hungary has said it is "physically impossible" for its economy to function without Russian oil. Slovakia said it would take years for its only refiner to make the switch from Russian oil, although it indicated it would seek an exemption rather than vetoing the package.

Other countries have said any ban should come alongside a push to reduce prices, so that the Kremlin does not end up collecting more revenue for less oil.

The EU agreed to a ban on Russian coal in the fifth round of sanctions last month, moving into the energy sector for the first time after the apparent massacres in Bucha deepened global outrage at Russia's offensive.

Ukraine wants it to tackle gas as well as oil, but that is likely to be the most contentious of the three issues because Europe is especially reliant on Russian gas. The energy-rich US banned all three in March.

Ms von der Leyen separately proposed a reconstruction package for Ukraine that would gradually bring it in line with EU standards, paving the way for eventual Ukrainian membership of the bloc.

Ukraine wants to be admitted to the EU under a fast-track procedure but leading members have said they will not waive the usual process, which can take years.