Hungary Floats Veto Threat as EU Works to Ban Russian Oil

(Bloomberg) --

Hungary would be ready to veto European Union sanctions on Russia's oil industry if the measures restricted Budapest's ability to import energy, according to a senior official in Prime Minister Viktor Orban's government.

The European Commission is set to propose a ban on Russian oil by the end of the year over its war in Ukraine, with restrictions on imports introduced gradually until then, Bloomberg reported Saturday, citing people familiar with the matter.

Hungary, which is heavily reliant on Russian energy, has been among the most vocal in opposing the expansion of sanctions. Orban's government has warned of severe damage to Hungary's economy without access to Russian oil and natural gas.  

“Since such decisions require unanimity, it makes no sense for the commission to propose sanctions affecting natural gas and crude oil that would restrict Hungarian procurements,” Cabinet Minister Gergely Gulyas told HirTV on Sunday.

Countries such as Hungary that are deeply reliant on Russian energy may get some additional flexibility as part of a compromise to drop their opposition to new sanctions, according to a person familiar with the matter.

Hungary's position on imposing sanctions on Russian oil and gas “hasn't changed, we don't support it,” government spokesman Zoltan Kovacs said in a Facebook post on Monday. He was refuting a report by German television network ZDF, which reported on Sunday that Hungary and Austria had lifted their veto threats.

German Vice Chancellor Robert Habeck said Monday that there is still no unity among EU member states about an oil embargo. 

“I don't know whether an oil embargo is imminent,” he told reporters. “I hear different things and talk to my colleagues about different options. Other countries are not that far along and I think you have to respect that.”

Germany would be able to handle such an embargo, he added, but it might still result in disruptions, he warned. “We have created a situation in which Germany can withstand an oil embargo. This means that the country will not be left without a trace.”

Orban, who was re-elected last month, earlier called sanctions on Russian energy his “red line.” 

His government has agreed with Russia to allow the conversion of their gas payments to rubles, testing the EU's sanctions policy. Russia last week cut off gas supplies to Poland and Bulgaria, making good on a threat to stop flows if payments aren't made in rubles.

EU energy ministers are meeting in Brussels on Monday to discuss Russia's demands for natural gas to be purchased in rubles, and are likely to discuss the oil sanctions package as well.

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