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The European Union will hit Russia’s lucrative oil industry, as well as its biggest bank and multiple media outlets, as part of plans to step up economic pressure on President Vladimir Putin over his war in Ukraine.
Imports of Russian crude oil will cease within six months and refined products by the end of the year in the bloc’s draft sixth sanctions package, proposed by European Commission President Ursula von der Leyen on Wednesday.
But the plan requires the unanimous backing of all 27 EU countries and there are already signs of potential splits over details.
Despite a special arrangement to give Hungary and Slovakia an extra year to adjust to the ban on oil imports, the government of Hungarian Prime Minister Viktor Orbán has expressed serious reservations and hinted that it may not be able to support these measures. The Slovak government told POLITICO the country will need at least 2025 to prepare.
For more hawkish countries such as Poland and the Baltics, the proposed timeline may already seem painfully slow.
According to documents seen by POLITICO, von der Leyen’s proposed plan includes:
- Sberbank, which accounts for around 37% of the entire Russian banking sector, will be excluded from the SWIFT international payment system. The Moscow Credit Bank and the Russian Agricultural Bank were also named in the proposed package, as POLITICO reported earlier.
- Russians will be banned from buying homes and other property in the EU
- Patriarch Kirill, the head of the Russian Orthodox Church was named in the sanctions plan
- Three broadcasters will be sanctioned in an attempt to reduce Kremlin propaganda: Rossiya RTR/RTR Planeta, Rossiya 24 and TV Center International.
It is the proposal to strike Russian fossil fuels, the revenue from which helps fund Putin’s war, that marks the most important part of the package.
Russia is the EU’s largest oil and gas supplier. As of April 27, the bloc had imported about 44 billion euros worth of fossil fuels from Russia through shipments and pipelines since the start of the invasion, according to the Center for Energy and Clean Air Research.
Political pressure from Ukraine for tougher action has pushed EU leaders to find ways to end the bloc’s dependence on Russian fossil fuels. The latest sanctions package saw the EU agree to phase out imports of Russian coal in the coming months. But oil and gas are where the big bucks are.
“Let’s be clear, it won’t be easy,” von der Leyen told the European Parliament. “Some member states are heavily dependent on Russian oil, but we just have to do that. So today we will be proposing to ban all Russian oil from Europe. This will be a complete ban on all Russian oil, transported by sea and by pipeline, crude and refined.”
Ending oil imports from Russia would represent a historic moment in Europe’s response to the war and a move that would permanently reshape global politics and energy markets.
The key question is whether the bloc is moving fast enough to impact Putin’s war effort. Some EU countries have called for a quick oil ban to hit Putin hard immediately. A Central European diplomat dismissed US warnings that a comprehensive EU ban on Russian oil would drive up international prices: “They’re afraid of the impact on their November elections.”
But von der Leyen stressed the need to act in an “orderly” manner, to put maximum pressure on the Kremlin’s war effort while minimizing disruption to world markets.
There are wider questions about the damage an EU ban will do to Russia’s fossil fuel revenue stream as it continues to export oil elsewhere in the world. According to Ajay Parmar, senior oil analyst at the energy intelligence service ICIS, the proposed ban is likely to increase prices, but the fact that it is phased in will lessen the impact, both on markets and on the finances of the Kremlin.
“The gradual nature of the sanctions will give Russia time to find other buyers for its rough – there are plenty of willing buyers in India, China and other parts of Southeast Asia” , Parmar said.
OPEC nations are unlikely to increase production to solve any oil shortages, a move that will keep crude prices at their current high above $100 a barrel, Parmar added.
The next step is for EU countries to discuss the Commission’s plan, which may change as member countries consider the details of the proposal. Some who rely heavily on Russian oil said they wanted to be sure they got alternative supplies before signing a ban.
In his speech, von der Leyen also proposed “massive” EU investment in a recovery plan for Ukraine, noting that the war was having a devastating impact on the country’s economy and infrastructure. She didn’t put a number on the size of the package.
“Europe has a very special responsibility towards Ukraine,” she said. “Today, I suggest you start working on an ambitious recovery plan for our Ukrainian friends.”
America Hernandez, Cory Bennett, Camille Gijs, Andrew Gray, Mark Scott and Tim Ross contributed reporting.
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