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EU earmarks €2B to ease pain of Russian oil ban

The European Commission will allow around €2 billion of its RePowerEU energy strategy funds to be spent on oil infrastructure, in an attempt to help landlocked eastern countries move away from Russian crude — but it may not make any difference to Hungary’s opposition to sanctions.

“Ninety-five percent of overall financing will go into speeding up and scaling up the energy transition,” said Commission President Ursula von der Leyen at a press conference. But also included are “up to €2 billion for oil infrastructure in view of stopping the shipment of Russian oil.”

EU countries have so far failed to reach an agreement on sanctions targeting Russian oil imports, with Hungarian Prime Minister Vikor Orbán objecting on the grounds that a ban would wreck his country’s economy.

The Hungarian government this week demanded between €15 billion and €18 billion to sign up to the sanctions package. The country’s foreign minister, Péter Szijjártó, had previously said adapting Hungary’s infrastructure to take non-Russian oil would take €750 million.

Today’s announcement would seem to take a step toward compensating Budapest for getting on board the oil ban.

“There are some member states which are landlocked and they have no access to any other possible alternative supply than the direct line from the Druzhba pipeline … the second problem they have is that for some of them, the refineries … are calibrated to a certain quality and specification, and only receive Urals oil,” a Commission official said. “So the type of investments that we are envisaging are mainly benefiting and targeting those countries.”

But there’s a catch: It remains unclear if Hungary will be able to access the new funds.

That’s because the €300 billion RePowerEU package, meant to move the bloc away from Russian oil and gas “well before 2030,” is mostly made up of €225 billion in unused loans from the Recovery and Resilience Facility (RRF). The remaining €75 billion in grants will either come from sales of additional CO2 emissions permits under the EU carbon market, or from countries’ existing agricultural and cohesion funds allocations.

Hungary still hasn’t clinched a deal with Brussels on its Recovery and Resilience Plan (RRP) to unlock access to its recovery funding. The process has stalled for months over issues including the Commission’s concerns over a lack of sufficient anti-corruption safeguards in Hungary.

“Indeed the RRP of Hungary is not approved yet, and we are in discussions with the Hungarian government — we have made very focused requests on what Hungary could do and should do in order for … the approval of the Hungarian RRP,” a second Commission official said. “We are continuing that dialogue, and the possibility for funding to be RRF, or additional funding, may be an additional element in this dialogue.”

The first official added it would be up to countries to propose oil infrastructure projects — with funding decisions going from there.

Lili Bayer contributed reporting.

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