Haggling with Hungary: How the EU could get a deal to ban Russian oil

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For almost a month, Hungarian Prime Minister Viktor Orbán has been holding up a plan to hit Russian President Vladimir Putin’s oil industry with EU sanctions.

The European Commission, along with many other member countries, wants to ban all Russian oil imports to cut off the Kremlin’s cash flow and squeeze Putin to end his invasion of Ukraine. But the Hungarian leader says his country’s economy would be severely damaged if supplies run dry.

The prospects for a speedy resolution to the standoff with Orbán look slim. Even so, diplomats and officials in Brussels are working on ways to bring him on board, with a few even privately hoping they can still do a deal in time for Monday’s European Council summit.

According to people familiar with the talks, here are some of the options that have been floated in recent days and weeks in an attempt to reach a compromise with the EU’s most awkward leader:

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Orbán’s government has previously said Hungary would need five years to adapt its energy systems to life without Russian oil. The European Commission’s original sanctions plan, unveiled on May 4, envisaged a ban for most member countries kicking in by the end of this year, but with an extra year for landlocked Hungary (and Slovakia) to comply.

When Orbán turned down this offer, the Commission came back with another: giving Hungary until the end of 2024. But that, too, failed to unlock Budapest’s support.

In recent days, the discussions have returned to the idea of extending the transition period for Hungary.

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Some diplomats have become frustrated with Hungary’s increasingly expensive demands for compensation.

On May 12, Hungarian Foreign Minister Péter Szijjártó suggested it would cost about €700 million to adapt his country’s pipeline and refinery infrastructure to non-Russian fuels.

Four days later the price tag had ballooned to between €15 billion and €18 billion. This, the minister said, would be to fund a “total modernization of Hungary’s energy structure” and cope with rising prices.

The EU has earmarked €2 billion for infrastructure investment for countries hardest hit by ending reliance on Russian fossil fuels.

Even if there’s a deal, Hungary faces a problem in getting the cash, as that is likely to depend on Orbán’s government tackling corruption and re-establishing democratic checks and balances.

Going ahead without Orbán

The Hungarians provoked fury among other member countries this month by apparently demanding a complete exemption from the ban.

Yet speaking in Davos, Irish leader Micheál Martin suggested the EU may need in future to be able to move ahead on sanctions without the unanimous support of all 27 members. For now, diplomats are resistant to this idea.

If 26 countries went ahead and banned Russian oil without Hungary, it would be a damaging and very public blow for the concept of European unity, something the bloc’s leaders prize highly. The fact it is now being openly discussed shows how divisive the sanctions debate has become.

Going ahead without oil

Another option raised earlier in May was simply to park negotiations over banning oil and push ahead with the rest of the EU’s sixth package of Russia sanctions. That would see Russia’s biggest bank, Sberbank, targeted, along with more Kremlin-linked individuals, propaganda outlets and pro-Moscow lobbying operations.

The big disadvantage of this approach is that it would represent a serious defeat for the EU’s credibility. European Commission President Ursula von der Leyen said when she proposed the “complete ban” on Russian oil that such a move would be hard but must be done. Anything short of that will be seen as a sign of the bloc’s collective weakness.

Surgical strikethrough

Another potential option could involve a more surgical carve out for Budapest. This could include allowing Russian oil to continue to be delivered by pipeline. Originally, von der Leyen wanted all imports, by pipeline and ship, to be subject to the ban.

But focusing sanctions on fuel supplied by shipping would enable landlocked Hungary to continue importing Russian crude via its existing pipeline routes. That’s something Orbán’s team has previously asked for.

One political question is how willing other EU leaders would be to hand Orbán such an obvious victory.

Are they close to a deal?

Views differ, wildly.

The French presidency of the Council of the European Union, along with some diplomats and European Council President Charles Michel, still think a deal could be done by the leaders’ summit starting Monday. There are more talks among diplomats scheduled for Friday and Sunday, and if there is the political will, anything is possible.

Many others doubt the prospects for success — including von der Leyen.

She sounded remarkably downbeat when she told POLITICO this week that she did not expect a solution at the summit. Orbán himself has said he doesn’t want to talk sanctions when he sits down with his fellow EU leaders on Monday and Tuesday.

Barbara Moens, Jakob Hanke Vela and Suzanne Lynch contributed reporting.