EU Leaders Debate New Sanctions Against Russia Amidst Disagreement

During the recent European Council meeting, EU leaders convened to discuss potential new sanctions against Russia. However, a significant hurdle emerged as Slovak Prime Minister Robert Fico expressed firm opposition to the proposed measures, complicating the decision-making process.

Hungary's Prime Minister Viktor Orbán was the first to arrive at the meeting on Thursday morning, where he initially addressed his domestic media. He announced the outcome of a public referendum regarding Ukraine's EU membership, claiming that 95% of participants opposed the idea. Notably, he omitted mentioning that only 29% of eligible voters took part in the referendum. Orbán's remarks included a stark warning that accepting Ukraine into the EU could lead to direct involvement in the ongoing conflict.

While Orbán focused on Ukraine's EU aspirations, the primary discussion topic among EU leaders centered around sanctions against Russia. European Council President António Costa aimed to finalize the 18th sanctions package and secure the extension of existing economic sanctions that have been in place since the onset of the war in Ukraine. These sanctions also involve the immobilization of over EUR200 billion in Russian state assets within the EU, the proceeds of which are intended to support Ukraine.

In January, Hungary had previously relented at the last minute concerning sanctions after a call from U.S. Secretary of State Marco Rubio to Hungarian Foreign Minister Péter Szijjártó. However, Hungary had since repositioned itself to resist the latest sanctions package, alongside Slovakia. Szijjártó publicly expressed concerns, not primarily about the sanctions themselves, but about the European Commission's plan to halt all fossil fuel imports from Russia by the end of 2027, arguing it would jeopardize Hungary's energy security.

Both Hungary and Slovakia rely heavily on Russian oil, with over 80% of their oil needs met through Russian imports. Due to geographical limitations, these landlocked countries are dependent on existing pipeline infrastructure from the Soviet era for their energy supplies. In light of the EU's decision to cease Russian oil imports following the invasion of Ukraine, Hungary and Slovakia successfully negotiated exemptions, unlike the Czech Republic, which has since ceased its Russian oil imports.

The EU Commission has already made concessions, suggesting that an import ban would only apply to Russian gas, which has not been flowing to Hungary or Slovakia since the transit agreement with Ukraine expired earlier this year. For oil, the commission proposed that Hungary and Slovakia submit plans detailing how they would transition away from Russian supplies by 2027. Despite these adjustments, both countries are advocating for further exemptions or extended timelines.

Fico reiterated his threat to veto the new sanctions unless a consensus on energy imports was reached. He highlighted the lack of access to liquefied natural gas terminals and warned of potential supply shortages and rising prices. Additionally, he pointed out the long-term validity of Hungary's contract with Russia, which extends to 2034, asserting that any penalties for non-compliance would need to be borne by the EU Commission.

The discussions at the European Council commenced with a delay, partly due to Fico's prior meetings with European Commission President Ursula von der Leyen and others. As negotiations began, the sanctions topic was postponed to the afternoon, indicating intense diplomatic efforts behind the scenes.

The proposed 18th sanctions package primarily targets the Russian energy sector, aiming to halt imports of gasoline and diesel produced from Russian crude oil in third countries, particularly affecting refineries in Turkey and India. This measure is intended to close a loophole that continues to allow the Kremlin to generate revenue, estimated at around EUR2 billion annually.

There remains uncertainty regarding a suggested reduction of the price cap on Russian crude oil from $60 to $45, with various EU member states supporting this move while the EU Commission has expressed hesitance following recent discussions at the G7 summit.

In the context of the sanctions package, Hungary and Slovakia have aligned their positions, while Orbán faced isolation regarding the extension of existing economic sanctions. Some diplomats remain optimistic about Orbán's potential to shift his stance in Brussels, particularly given prior indications of a willingness to negotiate.

In the backdrop of these discussions, Germany has proposed extending sanctions through a qualified majority vote, which could potentially diminish Hungary's leverage in future negotiations and incentivize Orbán to compromise.