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President Viktor Orban. Photo supplied

EU disunity highlighted by ban on Russian oil

In the EU dispute over the oil embargo against Russia, European heads of state and governments reached an agreement on Monday. More than two thirds of the previous Russian oil deliveries to the EU will be stopped, said EU Council President Charles Michel during the summit in Brussels. However, at the urging of Hungary and its Prime Minister Viktor Orban, only seaborne imports are affected. Imports via pipelines remain possible.

Published: May 31, 2022, 12:51 pm

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    Germany could also continue to supply itself with this oil. However, Chancellor Olaf Scholz (SPD) has announced that he will refrain from doing so. This should make the already expensive import even more expensive for the Germans. The prices for heating and fuel will continue to rise. This also affects all other prices because companies will likely pass their higher energy prices on to consumers. Inflation is likely to continue to rise. It was already 7,9 percent in Germany in May.

    Belgian Prime Minister Alexander De Croo called for a “pause” in sanctions after the meeting in Brussels.

    Hungary, the Czech Republic and Slovakia continue to purchase Russian oil

    Council President Michel announced that the EU was “cutting off a huge source of funding for its war machine” by the Kremlin. The compromise allows Hungary to continue to obtain Russian oil via the Druzhba pipeline. Refineries in Germany and Poland as well as in Slovakia and the Czech Republic are also connected to it. Poland, following the German example, has also declared that it does not want to benefit from the exception for pipeline oil.

    As a result, Russia will only sell a tenth of the previous oil volume to the EU in the coming year, maintained EU Commission President Ursula von der Leyen. The planned reduction in oil imports is therefore not two-thirds, but increases “effectively to around 90 percent”. So far, Russia has taken in an estimated €450 million a day from its oil sales to the EU.

    Before the agreement reached at the summit meeting of heads of state and government in Brussels, Hungary had referred to its great dependence on Russian oil and had blocked an embargo. The compromise found now leaves the country’s energy supply unaffected and the unity in the EU shattered.

    “Brussels’ proposal would have been tantamount to a nuclear bomb, but we managed to prevent it,” Prime Minister Viktor Orbán said after the agreement.

    In the meantime blending Russian oil with oil from other countries has been a convenient tool for companies to publicly say one thing (phase out Russian oil) and do another (buy lots of Russian oil).

    No cheap fuel for foreigners in Hungary

    The decision by Hungary to stop fuel tourism has hit the Austrians hard. Since the record prices of around 2 euros per liter, fuel tourists from mainly neighboring border areas have benefitted. Austria’s government has still not managed to lower fuel prices to an acceptable level.

    Last week Hungary’s government announced that it would stop fuel tourism. Above all, Sopron, which is close to the border, is a popular destination for Austrians to get fuel at cheap prices. That ended last Friday. In the future, only vehicles with Hungarian license plates will receive fuel at a cheap price. There will no longer be any discounts for vehicles with foreign license plates – with the exception of Serbian and Slovenian license plates, according to reports.

    Due to rising fuel prices, Hungary introduced a price cap back in November. According to reports, one liter of petrol or diesel costs the equivalent of 1,24 euros in Hungary. With a fuel price of around two euros per liter, Austria is one of the countries with the highest prices while Hungary has the cheapest fuel price compared to other European countries.

    But because Hungary looks after its own people, the Hungarian state is now accused of “violating EU law”. The question inevitably arises as to how that can be when disproportionate restrictions on fundamental rights and freedoms are no longer viewed as such. The unequal treatment of people without jabs is a case in point.

    Russian gas will keep flowing to those who pay

    Austrian Chancellor Karl Nehammer disclosed on Tuesday that the EU would not be discussing a ban on Russian natural gas imports at all. “Russian oil is much easier to compensate [for]… gas is completely different, which is why a gas embargo will not be an issue in the next sanctions package.” Estonia and Belgium supported the Austrian viewpoint.

    Meanwhile Gazprom will stop gas supplies to the Netherlands from Wednesday, after they refused to pay for Russian fuel in rubles. The company suspended gas deliveries to Danish energy company Ørsted on June 1, due to non-payment for April.

    Beer drinkers will pay for the ban

    A consequence of the energy policy of the German government and counterproductive sanctions against Russia, the German brewing industry is now considering how to deal with the impending beer shortage. Because beer is likely to be much more expensive than it is now.

    The head of sales at the traditional Erdinger Weißbräu brewery, Josef Westermeier, said beer was far too cheap. He therefore suggested a “white beer triage”, or a prioritization among the customers. “The most loyal customers have priority here,” explained Westermeier.

    Against the background of skyrocketing energy costs, beer will become much more expensive, says Westermeier. “Theoretically, a crate of wheat beer could cost three to four euros more. Exactly when is not yet clear.” It depends on the trade whether customers are willing to dig deeper into their pockets.

    Brewing uses a lot of energy. The increased costs are “cruel, they have tripled”. In the event of a gas crisis, the family business would have to weigh up its future.

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