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EU drafts plans to send cash to Hungary if Orbán agrees to Russian oil ban

EU officials are considering offering financial compensation to Hungary in an attempt to persuade Prime Minister Viktor Orbán to sign up to the bloc’s proposed sanctions on Russian oil.

According to three EU officials, the money could be channeled to Budapest as part of the bloc’s new energy strategy, which is due to be set out next week, to end its reliance on Russian fossil fuels.

Cutting off the European market for Russian President Vladimir Putin’s oil exports is seen as vital to limiting a lucrative source of revenue that helps him finance his war in Ukraine.

Securing Hungary’s support for the plan to block all EU imports of crude and refined fuels from Russia is essential to maintaining the political objective of strong and united European opposition to Putin’s actions.

But Orbán has so far blocked EU-wide sanctions on Russian oil since they were proposed on May 4, arguing that ending imports would be like dropping a “nuclear bomb” on Hungary’s economy.

Talks between European Commission President Ursula von der Leyen and Orbán on Monday ended without a deal and a follow-up video conference planned for Tuesday was canceled.

The most recent EU sanctions plan, circulated on Sunday and seen by POLITICO, envisaged giving landlocked Hungary and Slovakia — which rely heavily on Russian oil — until the end of 2024 to comply with the oil ban. That’s two years longer than the rest of the EU. The Czech Republic would have until the end of June 2024.

But Hungary has indicated it needs even more time to reduce its dependence of Russian oil. The officials said that to avoid stretching the timeline further, a form of financial compensation could also be on the table.

The Commission is looking to use the payment mechanisms in its upcoming energy strategy announcement, called REPowerEU, which will be announced on May 18 and is set to have funds available for EU countries including Hungary. The REPowerEU strategy aims to phase out the bloc’s reliance on Russian fossil fuels well before 2030.

One of the officials described time and money as “communicating vessels.”

“The more we can help Hungary with REPowerEU, the faster they can move away from Russian oil,” said the senior EU official.

The discussion about energy is separate from the dispute between the Commission and Budapest about cutting funding to Hungary for eroding the bloc’s rule-of-law standards, the official said. Neither side attempted to mix those issues, another senior EU official said.

A spokesperson for the European Commission on Thursday acknowledged the “specific situation of member states and the need to cater for their specific circumstances” when finalizing the Russian oil sanctions.

Officials and diplomats are now trying to forge a compromise to get Budapest on board. This morning, French President Emmanuel Macron spoke to Orbán over the phone to “finalize in a spirit of solidarity the guarantees which are necessary for oil supply conditions,” according to an Elysée official.

An announced videoconference between the Commission and regional players, which was due to discuss cooperation on oil infrastructure this morning, was postponed until further notice. The Commission spokesperson said it will take place “one we have made progress on the technical work so that the video conference can bear the best possible fruits.” He also mentioned a “package of solutions” was being prepared.

It’s unclear whether a deal with Hungary can be reached before EU ambassadors meet again Wednesday morning, several diplomats and officials said. Initially, the goal was to have the bloc’s sixth sanctions package adopted on Monday.

Top EU diplomat Josep Borrell on Tuesday said he hoped that the “difficulties will be raised” by next week, before the EU foreign affairs ministers meet on Monday. If not, Borrell said it’s up to foreign affairs ministers to discuss the package.

“Some delay is not a disaster, as long as the EU unity on sanctions is maintained,” one EU diplomat said.

Camille Gijs and Maïa de la Baume contributed reporting.

This article is part of POLITICO Pro

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