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EU Prepares Ban on Russian Oil

The European Union is likely to propose ending purchases of Russian crude oil by the 27-country bloc before the end of 2022, and a ban on purchases of Russian refined-oil products by year-end, according to two senior diplomats.

The proposals, set to be circulated on Tuesday to EU member states, would be the centerpiece of a sixth package of EU sanctions on Moscow over its invasion of Ukraine. Slovakia and Hungary would get additional time to implement the embargo because of their particularly high dependence on Russian oil.

A decision by EU member states could come this week.

The EU’s accelerating preparations for ending purchases of Russian oil come after Germany, Europe’s biggest economy, changed his mind and swung behind the idea of ​​an oil embargo.

“We are also pushing within the EU to now phase out oil together as Europe in the EU’s sixth sanctions package,” German Foreign Minister Annalena Baerbock told public broadcaster ARD late on Sunday. She also said the EU’s sweeping economic sanctions on Russia should remain in place until Russian troops withdraw completely from Ukraine.

EU commissioners are expected to complete the proposals at a meeting of top Brussels officials on Tuesday. All 27 EU member states would need to back the new sanctions proposals, and diplomats warn that a consensus might take some time to craft. Hungary is among the countries which have so far opposed an embargo.

Amid an escalating energy war between the EU and Russia, EU energy ministers were also meeting in Brussels on Monday to discuss how to respond to Moscow’s decision last week to cut off natural-gas deliveries to Poland and Bulgaria.

Germany said last week that it is rapidly reducing its reliance on Russian oil by arranging new oil-supply contacts. Berlin said that only 12% of the country’s oil imports currently come from Russia, down from 35% before Moscow launched its full-scale invasion of Ukraine on Feb. 24.

The Commission is also likely to propose sanctions against additional Russian officials and possibly new sanctions against Russian banks, including Sberbank, diplomats and officials have said. Senior officials from the EU’s member states are expected to discuss the proposals on Wednesday.

German Foreign Minister Annalena Baerbock confirmed earlier signals that Berlin would drop its opposition to an oil embargo.


Photos:

Markus Scholz/Zuma Press

Hungarian government officials said again at the weekend that Budapest opposes further energy sanctionsbut EU diplomats said the bloc was discussing a longer transition period for Hungary, as well as Slovakia, which is likewise heavily reliant on oil sent via pipelines from Russia.

Austria’s energy minister said on Monday that her government, which has been wary of an oil embargo, is now prepared to support such a step.

Before Russia’s invasion of Ukraine, the EU was importing between 3 million and 3.5 million barrels of oil a day from Russia, sending just under $400 million in payments daily, according to Brussels-based think tank Bruegel. That amounts to some 27% of EU oil imports.

Oil-and-gas revenues accounted for 45% of Russia’s federal government budget in 2021, according to the International Energy Agency.

As Europe races to wean itself off Russian energy, American natural-gas producers are struggling to meet the demand and prices are rising. Here’s how factors including extreme weather and equipment needs have created a bottleneck amid the war in Ukraine. Illustration: Laura Kammermann and Sharon Shi/WSJ

While the bloc hasn’t so far imposed sanctions on Russian gas, Moscow last week made a pre-emptive move amid growing tensions over energy, halting gas flows to Poland and Bulgaria in what was seen as a warning shot to the rest of the bloc .

Russian energy giant Gazprom PJSC said it made the decision because it hadn’t received payment in rubles for gas sales to Poland and Bulgaria as required by a new decree by President Vladimir Putin. For now, the two countries are receiving gas from their neighbors to prevent disruptions.

To coordinate the bloc’s response to Gazprom’s decision, France, which currently holds the rotating presidency of the EU, called an emergency meeting of energy ministers for Monday afternoon.

With the next set of EU gas payments to Russia coming due later this month, EU members—and in particular Germany—are scrambling to reduce their dependence on Russian gas imports by striking new contracts with alternative suppliers and taking measures to reduce gas consumption at home .

The EU has said complying with Russia’s new ruble payment decree would mean firms breaching the bloc’s own sanctions on Russia and has urged member states to ensure that payments are made only in euros and dollars. EU officials say around 97% of the bloc’s energy contracts with Russia stipulated payment in euros or dollars.

“We will continue to pay in euros the contracts where it’s stipulated in euros or in dollars where it’s stipulated in dollars,” said French Energy Minister Barbara Pompili on her way into Monday’s meeting in Brussels. “We cannot accept this type of scheme which tears up agreed contracts.”

Germany, the world’s biggest importer of Russian gas, draws about a third of its gas imports from Russia, down from 55% before the war. But the German government has said the country will need to continue importing Russian gas until 2024.

Write to Laurence Norman at laurence.norman@wsj.com and Bertrand Benoit at bertrand.benoit@wsj.com

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