Representatives of 27 EU countries on Tuesday agreed late in the evening on another sanctions package against Russia, which should be formalized later this week. Although Prime Minister Viktor Orban is increasingly specializing in anti-sanction speeches in Hungary, this time Budapest has hardly delayed the compromise in Brussels.
Reducing the Kremlin’s revenues
Last weekend, Hungarians let go of their demands that the EU permanently agree to re-export – from Hungary to other EU countries – crude oil from the Druzhba pipeline (and refining products based on it), which after 5 December will be exempt from the EU-wide embargo on this raw material from Russia. This time the biggest brakes were the Greeks, Maltese and Cypriots who fear the impact of the new oil price cap on their shipping industry.
The new sanctions proposed by the European Commission last week are a political response to the pseudo-referenda and the annexations of the occupied territories of eastern Ukraine. However, the main point of the sanctions package is the international oil price cap, which has been in place for several months, and is being strongly promoted by the United States in the G7 forum. Washington sees this as an effective way to reduce the Kremlin’s oil revenues, but at the same time without immediately blocking its sale, e.g. in Africa and Asia, because such supply constraints would drive up global prices of this raw material also from other producers.
The G7 will set the price of oil from Russia
The EU already agreed in May that it would introduce an embargo on Russian oil from December 5 (apart from the “Przyjaźń” pipeline, which is responsible for 10 percent of oil imports from Russia so far), and on refining products from February 5, 2023, and this does not change . However, in the new sanctions package, the 27 EU countries agreed on a legal basis that, as of December, will allow EU companies to legally transport oil from Russia to buyers outside the EU and insure such transport, provided that oil does not exceed the price set by the “Price Limit Coalition” based on the group G7, of which the Union as a whole is also a part.
The G7 Group has yet to agree on the details of calculating the price limit. In addition, the US Congress is advocating the imposition of sanctions against foreign buyers who fail to comply with the price cap. However, the effectiveness of the limit is to be based mainly on the fact that the oil transport insurance market is almost monopolized by companies from the EU and the UK. Britain is cooperating with Brussels on this issue, and moreover, Europeans have a large share of the maritime oil transport market.
Yes, the Russians and their buyers will be able to circumvent the G7 price cap system. But the use of ships and financial services, including insurance, from companies from outside the G7 and EU countries will greatly increase the price of such oil exports
– explains the EU diplomat involved in talks with Washington on this subject.
Greece, Malta and Cyprus, when negotiating the latest sanctions, expressed concerns that a ban on transporting Russian oil above the price cap would expose their maritime industry to losses, and that business would be quickly intercepted by countries outside the “Price Limit Coalition”. Ultimately, they satisfied themselves with guarantees that before December, Brussels, inter alia, it will check whether this mechanism is indeed joined by all members of the G7 group, as well as other pro-American countries with significant merchant shipping, including South Korea.
If the “Price Limit Coalition” built primarily by the US does not work out, the Union will still be able to withdraw
– convinces one of the EU diplomats.
Other new sanctions include extend the ban on exports to Russia to additional parts for the aviation industry, electronic components and chemicals that may be used by the Russian army or the arms industry. In turn, additional import bans from Russia concern, inter alia, types of Russian steel or machinery not yet covered by sanctions.
The Belgians defended the diamonds
On the other hand, Belgium vetoed the idea of banning the import of rough diamonds. Belgians, specifically the grinding and jewelery industry in Antwerp, bought Russian diamonds worth 1.8 billion dollars last year, almost half of their global exports from Russia worth $ 4 billion. The Belgian authorities argue that the EU diamond embargo would hit their companies, and at the same time – contrary to the logic of the sanctions – would not bring any significant losses for Russia, because they would export diamonds, for example, via Dubai.
Poland together with Ireland, Lithuania, Latvia and Estonia jointly demanded stricter restrictions, including a ban on the import of Russian LPG (after the transition period), but it was not possible to introduce this into the EU compromise.
In addition, the EU is expanding its blacklist of Russians with an entry ban and frozen property in the EU to 1,262 people, or another 30 names. Among them is Aleksander Dugin, who – as the sanctions regulation explains – “ideologically and theologically justified the annexation of Crimea and Russia’s war with Ukraine, seeing it as the liberation of Ukraine from Western influence.”
“Dugin’s ideology focuses on the idea of building a totalitarian, Russian-dominated Eurasian empire to which Ukraine belongs for historical, religious and geographic reasons. Dugin’s ideological assumption is that Ukraine is an artificial state that threatens Russia’s security and the planned Eurasian empire. Therefore, a military invasion. to Ukraine was inevitable “, proclaims the justification of the EU sanctions.
Dugin, who lost his daughter Daria in August (who was under British sanctions for disinformation and war propaganda) in an alleged attack in Moscow, has been on the US sanctions list since 2015.