Hungary has maintained its demands for energy investment before it agrees to a Russian oil embargo with its Western allies.
"Solutions first, sanctions afterward," Hungary's Justice Minister Judit Varga said ahead of fresh talks with the European Union (EU) on the sixth package of sanctions against Russia after it invaded Ukraine.
The Hungarian government has been clashing with multiple EU member states and its executive arm, the European Commission, which has been calling for swift approval of more energy sanctions against the Kremlin following the invasion of Ukraine.
The European Commission proposed the sixth package of sanctions earlier this month, including a six-month phase out of Russian oil supplies.
However, Hungary's opposition to the measure has prevented the ban from being confirmed - as it requires the unanimity of all the 27 member states to approve it.
Several EU member states including Czechia and Slovakia have secured extended phase-outs of two years rather than six months, but Hungary is also looking for an exemption for piped oil supplies, or compensation.
However, Robert Habeck, Germany's Economy Minister has hinted his country could vote through a ban excluding Hungary.
France, Lithuania, Belgium, and Ireland have urged a compromise before the summit during closed-door discussions among EU diplomats last week, sources said.
Sources told the news agency Reuters that Sweden has suggested dropping the oil embargo to move ahead with other new sanctions if that was necessary.
This includes the exclusion of Sberbank and other Russian lenders from the SWIFT banking system and blacklisting more individuals held responsible for the war.
Related: Oil Markets Are Bracing For A Slew Of Bullish News
However, an oil ban remains the centerpiece of a proposed sixth package of sanctions.
The bloc is currently dependent on Russia for around 25 percent of its oil supplies.
Hungary is heavily reliant on its crude stocks and has revealed it would need €750m in short-term investments to upgrade refineries and expand a pipeline bringing oil from Croatia.
It also said the longer-term conversion of its economy away from Russian oil could cost as much as €18 bn.
The Commission last week offered up to €2bn in support to countries that are landlocked and reliant on Russian supply - Hungary, the Czech Republic and Slovakia.
It has also unveiled a €210bn plan to end Europe's reliance on Russian fossil fuels by 2027, but it has not yet revealed how EU states would share this money.
By CityAM
More Top Reads from Oilprice.com:
CityAM.com is the online presence of City A.M., London's first free daily business newspaper. Both platforms cover financial and business news as well as sport and… More
Comments
The simple answer is for the EU to let rational thinking prevail over a temporary hatred of Russia. Russia is too big to be ignored and the importance of its supplies of energy and food products to the world is equally too quintessential to be ignored. Therefore, common sense dictates that it is far more beneficial for the EU to forgo an embargo on Russian oil than to go ahead with.
Hungary is absolutely right to demand solutions before a ban on Russian oil. Hungary is merely trying to protect its economy from the disastrous economic fallout of a ban. If the EU is hell-bent on cutting its nose to spite its face as the proverbial saying goes, Hungary isn’t prepared to commit such a folly.
Even before the ban, the EU has already downgraded its projected economic growth from 2.7% to 1.4% for this year.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Why focus on Hungary?