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EU To Block Seaborne Russian Oil Deliveries, Not Pipeline, To Satisfy Hungary

Tyler Durden's Photo
by Tyler Durden
Sunday, May 29, 2022 - 06:00 PM

Last week EU leaders held what was deemed an "awkward" summit, as one diplomat attendee put it, given the don't mention the Russian oil ban elephant in the room. 

Given Prime Minister Viktor Orban's Hungarian government recently likened a Russian oil ban to dropping a nuclear bomb on its economy (and with some smaller EU countries quietly agreeing with that assessment), there seems a growing consensus - at least behind the scenes - that a total embargo is completely unrealistic and untenable, especially amid steadily ratcheting energy prices.

But the European Commission seems to have quickly changed its tune while facing certain 'hard realities', as many predicted, coming off a mere month ago when its head Ursula von der Leyen said, "This will be a complete import ban on all Russian oil, seaborne and pipeline, crude and refined." Now just weeks later, on Saturday the European Commission hinted it will move toward a ban only on seaborne deliveries, but not pipeline supplies as part of its "phased approach".

Image source: Transneft

Bloomberg on Saturday cited EU officials privy to the ongoing discussions who pinpointed that this allows a broader ban without significantly impacting Hungary's primary supply, which is transferred through the massive Druzhba pipeline, which is also the world's world's longest oil pipeline.

Industry publications point out that in the month prior to the Russian invasion of Ukraine, some 750,000 b/d of Russian crude flowed through the Druzhba to various refineries in Europe.

Bloomberg writes of the impending modified oil ban that "The proposal would give extra time to Hungary, which has antagonistic the deal, to discover a technical resolution that satisfies its power wishes. It might additionally cope with the worries of different landlocked nations, together with Slovakia and the Czech Republic."

And further, "Bulgaria would get a transition duration till June or December 2024 and Croatia may get an exemption for imports of vacuum fuel oil. The fee additionally proposed proscribing re-exports of Russian oil provided by way of pipeline to different member states or 3rd nations."

Hungary's strong resistance is not the only factor driving a compromised "ban" - as Von der Leyen described in an interview days ago with MSNBC that she fears Russia's Vladimir Putin "might be able to take the oil that he does not sell to the EU to the world market, where the prices will increase, and sell it for more – and that would fill his war chests." For example China has reportedly stepped up purchases for its strategic reserves, with India also said to be salivating over more imports.

Druzhba pipeline map

Von der Leyen said further, "Over time what we do is get rid of the overall dependency of the Russian fossil fuels, all three of them, and never to go back again… If there's anything Putin has achieved it is that he lost his best client and Europe will never come back, and he pushed us – and that's good – into the direction of renewable energy."

As for Hungary and "time" - we highly doubt the Orban government will ever come on board, but likely there could be a status quo situation of more and more exemptions and an ever obstinate Budapest unwilling to make the "sacrifice" that other EU capitals like Berlin and Rome have called for.

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