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    Brussels to finance oil pipelines in Hungary to win Orbán's support for Russian oil embargo

    May 16, 2022 - CE Noticias Financieras


      Brussels hopes to overcome in the next few days Hungary's veto to the embargo on Russian oil and thus approve the sixth package of sanctions against Moscow for the invasion of Ukraine. The European Commission, according to EU sources, is negotiating with Viktor Orbán's government an EU investment program that would help to alleviate Hungary's dependence on Russian hydrocarbons. The plan will be accompanied by a transitional period for the end of Russian oil imports in some EU partners, a period that is intended to be used to build new transport infrastructures. The same sources are confident that the likely agreement between Brussels and Budapest will allow the sanctions to be approved this week or next week at the latest.

      More informationFollow the last hour of the war in

      UkraineEU foreign ministers, who are meeting this Monday in Brussels under the presidency of the High Representative for the Common Foreign and Security Policy, Josep Borrell, will address Hungary's veto, although without any possibility of overcoming it, according to diplomatic sources. Brussels is confident, however, that Orbán's support for the sanctions will be achieved in the short term thanks to a multi-million dollar commitment of European investment in that country's energy security.

      EU sources hope that the agreement will be reached after the approval on Wednesday of an updated EU plan (dubbed REPowerEU) to rapidly reduce dependence on hydrocarbons. The draft document, to which EL PAÍS has had access, proposes to partially redirect numerous items of the Community budget, including cohesion funds and those of the Common Agricultural Policy, towards renewable energy projects, energy efficiency and distribution infrastructures.

      The MidCat-Brussels pipeline

      also proposes to use part of the substantial revenues of the States thanks to the auctions of the CO2 emissions market. And the Commission is committed, among other measures, to approve before the end of the year a rule that "will accelerate the design and reimbursement of energy efficiency and renewables projects through the usual cohesion policy reimbursement mechanisms," according to the draft of the plan.

      The aim is to ensure the energy security of the 27 EU member states. But Orbán is not satisfied with vague promises of interconnection such as those Spain has been hearing for two decades and demands very concrete investment plans and a clear timetable for compliance so that everything is not left up in the air. In the case of Spain, the EU committed itself in 2002 to an electrical interconnection equivalent to 10% of the installed power in 2005. The target has been postponed and currently stands at less than 3%.

      The Spanish government is insisting that the new REPower EU plan should include the demands for interconnection of the Iberian Peninsula with Spain. The third vice-president of the Government, Teresa Ribera, has written to the Commission demanding greater investment. Spanish sources regret that the latest draft of the Commission's document still does not include Spanish requests and there is no reference to the MidCat gas pipeline, the project to connect with France through the Catalan Pyrenees that was abandoned in 2019 and is now trying to be recovered.

      The Commission estimates that the adaptation of oil transport infrastructure to calm the concerns of Hungary and other countries in a similar situation of dependence will not be very substantial. In some cases it is a matter of building new pipelines, from the west and south of the EU, and in others of extending or increasing the capacity of existing ones.

      Investments are much more advanced in the gas sector, and between this year and next year facilities with the capacity to transport 20 billion cubic meters per year will come on stream, according to the Commission document. In the electricity sector, Brussels puts the additional investment to adapt the grid to the new needs at 29 billion.

      The haggling with Orbán, according to EU sources, revolves around both the EU investment to finance the pipeline network and the specific deadlines for its implementation. And these sources hope that the agreement will clear Hungary's veto and maintain the unanimity that has prevailed since the first round of sanctions at the end of February and that was in jeopardy as they moved into the sensitive area of energy supply.

      Commission President Ursula von der Leyen proposed earlier this month to suspend imports of Russian crude oil for six months and refined products for eight months. But this new round of sanctions, which already affects a core part of the trade relationship between the EU and Russia, has run aground due to the fear of several countries, with Hungary at the forefront, of endangering the security of their energy supply.

      The group led by Orbán includes Slovakia, the Czech Republic and Bulgaria, countries that have been less vocal in their objections to Von der Leyen's proposal, but which find themselves in a situation of risk similar to Hungary's: high dependence on Russian oil, few or no alternative connections and no sea ports through which to import crude oil by ship.

      Diplomatic sources recognize that this is a real problem and that once the Hungarian problem is solved, the rest of the countries will be able to benefit from the agreement and the longed-for unanimity to approve the sanctions will be achieved. The negotiation with Budapest has included a lightning visit by Von der Leyen to the Hungarian capital to meet with Orbán and a phone call by the French President, Emmanuel Macron, to the Hungarian Prime Minister.

      In addition to the oil embargo, the sixth round of punishments against Moscow includes sanctions against high-ranking military officers or those considered responsible for the massacres in Bucha, on the outskirts of Kiev; a ban on the use of the SWIFT financial communication system by three major Russian banks, including the largest of them, Sberbank; and the suspension of the broadcasting licenses of three major Russian television channels, accused of being instruments in the service of propaganda and disinformation disseminated by the Kremlin.

      Diplomatic sources assure that the 27 countries have already agreed on all these sanctions and only the last hurdle of the oil embargo remains to be overcome. Von der Leyen already warned when he launched the proposal: "It will not be easy, some member states are heavily dependent on Russian oil, but we simply have to do it".

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