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E.U. agrees to phase out Russian oil but exempts pipeline deliveries

European Commission President Ursula von der Leyen said May 31 that the new deal will cut around 90% of oil imports from Russia to the E.U. by the end of 2022. (Video: Reuters)

BRUSSELS — European Union countries finally reached a deal to wean themselves off Russian oil, their most significant effort yet to hit the Russian economy over the war in Ukraine, although the impact will be softened by an exemption for pipeline oil, a concession to landlocked holdouts, notably Hungary.

After weeks of negotiations, the 27 countries agreed Monday to end seaborne deliveries of Russian oil within months. Pipeline deliveries will continue to flow for now. Several countries will also get extensions or exemptions, according to E.U. officials and diplomats.

European Council President Charles Michel said the agreement would cover more than two-thirds of imports of Russian oil, cutting off a “a huge source of financing" for the Russian “war machine.” Officials and diplomats will still have to agree on technical details in the coming days, and the sanctions must be formally adopted by all 27 nations. E.U. leaders meet again Tuesday to discuss the Russian invasion.

Hungarian Prime Minister Victor Orban, a perennial E.U. spoiler and one of Russian President Vladimir Putin’s closest allies in Europe, had obstructed a deal, insisting on more time and money to upgrade his country’s oil infrastructure.

While there was sympathy for Hungary’s position, some diplomats said Orban used the situation to hit back after the E.U. withheld economic recovery money, and threatened to hold back billions of euros in subsidies, for democratic backsliding in the country.

In remarks published after the deal was reached, Orban claimed victory. "We have managed to defeat the Commission’s proposal to ban the use of oil from Russia in Hungary, he said. “It would have been the equivalent of a nuclear bomb, but we managed to avoid it.”

Although the compromise falls short of the full and immediate ban that Poland and the Baltic states demanded and does not address Russian natural gas, it still marks a turnaround for the European Union. The E.U. imported 35 percent of its oil from Russia in 2020 and in March told the United States it was too dependent on Russian energy to join an embargo.

The oil phaseout is part of the sixth round of E.U. sanctions on Russia, a package that will remove the largest Russian bank, Sberbank, and others from the SWIFT system for international transactions and ban three more Russian state-owned broadcasters from the European Union, according to officials.

Commission President Ursula von der Leyen said the bloc will also take aim at top military officers and others linked to possible war crimes in Ukraine. A full list of the targeted people and entities will be published when the deal is formally drawn up.

At the summit Monday, E.U. leaders listened to a virtual address from Ukrainian President Volodymyr Zelensky, who pushed leaders on oil and appealed to European unity.

E.U. leaders also discussed measures to support the Ukrainian economy, both now and after the war. Michel said the bloc plans to boost Ukrainian liquidity and help with the country’s reconstruction. The bloc is considering a nearly $10 billion plan to provide financial assistance in the short term and exploring ways to fund rebuilding.

Since Russia invaded Ukraine, the European Union has worked with the United States and other allies to weaken the Russian economy, hitting Moscow with a number of sanctions packages but at the same time continuing to buy Russian fossil fuels.

After photographs and footage of atrocities in the Ukrainian town of Bucha started circulating in April, E.U. officials announced a plan to phase out Russian coal. They vowed that oil would be next.

The original oil proposal from the European Commission in early May called for countries to phase out imports over six months and refined petroleum products by the end of the year. According to diplomats, it also granted extensions to at least two countries heavily dependent on Russian pipeline oil: Hungary and Slovakia.

In the weeks since, additional countries pushed for extensions. After a landslide election victory in Hungary, Orban appeared bolder still, seeming to enjoy the leverage he held over the bloc and, some diplomats said, trying to use the situation to get his hands on frozen pandemic recovery money.

The exemption for pipeline oil allows continued supplies through the Druzhba network, which runs through Belarus to Poland and on to Germany, and through Ukraine to Slovakia, the Czech Republic and Hungary.

E.U. officials say pipeline oil accounts for a third of imports. But if Germany and Poland keep their pledges to phase out Russian oil by the end of the year, Russia will be sending less than that. Von der Leyen wrote online that the new deal “will effectively cut around 90 percent of oil imports from Russia” to the European Union by the end of the year.

In response to news of the oil deal, Russia’s permanent representative to international organizations in Vienna, Mikhail Ulyanov, tweeted that his country would simply find new buyers.

Because of rising prices, Moscow has continued to earn about the same amount of money from fossil fuel sales as it did before the invasion, according to estimates by the Wednesday Group, a team of experts tracking Russian energy sales. That adds up to about $1 billion or more a day in revenue, the group found.

The E.U. decision to forgo an immediate ban on all oil will give Moscow time to find alternative buyers, with Asia presenting the most promising markets. It will be difficult for Russia, however, to find buyers with enough appetite to replace the E.U. market. Moreover, reconfiguring its energy export system will take time and money.

Edward Gardner, a commodities economist at Capital Economics in London, said he expects Russian exports to fall about 20 percent this year. The European Union should be able to manage “relatively okay” when it comes to finding new suppliers, Gardner said, but oil prices will stay high in Europe and elsewhere.

“The global impact of less Russian oil getting on to the market should be continued high prices,” he said. Even if Russia sells what it has at a deep discount, those high prices will cushion the losses, analysts said.

War in Ukraine: What you need to know

The latest: Russian President Vladimir Putin announced a “partial mobilization” of troops in an address to the nation on Sept. 21, framing the move as an attempt to defend Russian sovereignty against a West that seeks to use Ukraine as a tool to “divide and destroy Russia.” Follow our live updates here.

The fight: A successful Ukrainian counteroffensive has forced a major Russian retreat in the northeastern Kharkiv region in recent days, as troops fled cities and villages they had occupied since the early days of the war and abandoned large amounts of military equipment.

Annexation referendums: Staged referendums, which would be illegal under international law, are set to take place from Sept. 23 to 27 in the breakaway Luhansk and Donetsk regions of eastern Ukraine, according to Russian news agencies. Another staged referendum will be held by the Moscow-appointed administration in Kherson starting Friday.

Photos: Washington Post photographers have been on the ground from the beginning of the war — here’s some of their most powerful work.

How you can help: Here are ways those in the U.S. can help support the Ukrainian people as well as what people around the world have been donating.

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