Oil Price Cap, Slovak Veto Stand In Way Of New EU Russia Sanctions

Canada News.Net

20 hours ago

The European Union is edging closer to finally adopting its latest sanctions package, the 18th since the full-scale Russian invasion of Ukraine over three years ago. But two items still remain to be negotiated.
Firstly, the price cap on Russian oil.
Its still in the draft proposal seen by RFE/RL, but there is a question whether it will remain there. Secondly, there's a Slovak veto on an issue that is related to the sanctions though not directly part of the package.
When the European Commissionpresentedthe proposed package to EU member states in early June the signature proposal was to lower the price cap on oil from the current level of $60 per barrel to $45.
As this policy is under the Group of Seven (G7), the EU tried to secure approval from other G7 countries, notably the United States, on such a move at a summit in Canada last month.
But it failed to get the Americans onboard, especially as oil prices surged after Israeli and American attacks on Iran.
Brussels has, however, considered going ahead regardless, especially as the Russian oil price cap initially was a way around an EU ban on services to transport Russian oil.
In recent discussions in Brussels, EU officials familiar with the file but not authorized to speak on the record, note that Cyprus, Greece, and Malta -- countries with considerable maritime services sectors -- are against lowering the price cap.
It is, however, understood that Cyprus and Greece could ease their stance especially as the United Kingdom, another big maritime insurer, is onboard with Brussels on a lower oil price cap.
Diplomats even think that the United States eventually could join as well if Brussels and London are fully onboard. The last holdout appears to be Malta, even though there are some hopes that Valletta could accept a lower oil cap, though above the proposed $45 per barrel.
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Then there is the Slovak veto.
Bratislava has conditioned its thumbs up for more Russia sanctions on the reworking of a separate proposal by the European Commission to phase out Russian energy imports into the bloc by the end of 2027.
The proposal, presented in May, is called RePowerEU and has caused consternation in Slovakia as well as Hungary, which is understood to be quietly backing its northern neighbor.
And it is easy to see why.
The European Union has since 2022 limited various Russian energy products through sanctions, for example banning most coal and oil imports into the bloc.
But sanctions require unanimity of the 27 EU member states, and Hungary and Slovakia have in the last couple years vetoed some of the more restrictive proposals from Brussels targeting Russian energy.
The European Commission is therefore attempting via RePowerEU to regulate the EUs internal market with a raft of measures, most of which can be adopted via a qualified majority of 55 percent of the member states representing 65 percent of the total EU population voting in favor. In other words, a route that circumvents Bratislava and Budapest.
The key proposal will be a legal requirement to ban all new Russian gas contracts and short-term so-called spot contracts for Russian liquified natural gas (LNG) by the end of this year at the latest. For longer-term contracts, the regulation will suggest a wind-down period ending no later than the end of 2027.
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EU gas imports from Russia have decreased from 45 percent in 2021 to 19 percent in 2024 and are expected to fall to 13 percent in 2025 after the end of the Ukraine transit route at the start of the year. The EU has, however, been embarrassed that Russian LNG imports increased by 12 percent last year compared to 2023.
With regard to oil imports, the situation is less dramatic but very geographically specific and politically sensitive.
Russian oil imports only constitute 3 percent of total EU oil imports today, compared to 27 percent back in 2022 largely due to sanctions that banned Russian seaborne imports and refined petroleum products.
But landlocked Central European nations got an exemption from these measures. While the Czech Republic now has stopped importing from this source, Hungary and Slovakia still get 80 percent of their oil imports from Russia.
The European Commission will now demand an end to Russian oil imports by the end of 2027, and the pair need to provide a timeline on how they plan to achieve this, present what alternative options they are planning to take, and provide greater transparency of their current contracts with Moscow.
Slovak Prime Minister Robert Fico indicated at the EU summit in Brussels on June 26 that he would not green light the sanctions package, saying that he needs clarifications over RePowerEU.
According to diplomats familiar with the file, Bratislava is not so much asking about exemptions but legal certainty about potential Gazprom claims over contracts.
Last week, European Commission officials visited Bratislava to meet with both Slovak officials and representatives of energy companies.
While EU diplomats said the meetings went well, it appears that Fico still isnt fully onboard. EU ambassadors who met in Brussels on July 4 to discuss the sanctions were told that it's not ripe for approval just yet.
The press release issued by the Slovak Economy Ministry after the European Commission visit also hinted that more talks are needed in the coming days.
Economy Minister Denisa Sakova said that the Bratislava meeting was an important step towards finding solutions that take into account the specific factors of each member state when diversifying sources and thus ensure affordable energy prices also for the Slovak industry, which is facing rising costs.
She added that we are ready to continue to take a constructive approach to the proposed measures and to continue the expert discussion with the involvement of all relevant stakeholders."