EU Commission set to propose phasing out Russian oil by end of year

The European Commission is set to propose phasing out Russian oil imports as part of a new package of sanctions for Moscow, in a drive to squeeze Vladimir Putin’s most vital war-funding stream.

Income from energy exports has been critical for financing Russia’s invasion of Ukraine and EU countries have been weighing up how to target Putin’s oil, gas and nuclear sectors after already agreeing to sanctions on coal.

But Brussels is not set to put forward an immediate, full-blown ban on Russian oil imports to the bloc when details are unveiled, expected as soon as this week.

The European Commission is instead set to propose phasing out Russian oil imports by the end of the year, EU diplomats said. The gradual move away from Russian oil is designed to ensure the bloc’s economic powerhouse Germany remains on board, and to minimize disruption to international oil markets.

Diplomats said the Commission will propose some form of exceptions or transitional measures for Hungary and Slovakia, given how much these two countries rely on Russian oil and the difficulties they face in finding alternative supplies. In recent weeks, Hungary has emerged as one of the biggest roadblocks to going further with sanctions on the Russian energy sector.

Hungary had stressed its concerns were economic, not political, several diplomats said, which paved the way for a political compromise to address those worries.

Berlin had previously indicated to other EU capitals it was ready to consider cutting Russian oil — even if it is not yet able to abandon imports of gas — but only under specific conditions. Last week, the German ambassador told his counterparts that Berlin was not just OK with oil sanctions, but would even actively support an oil phaseout.

The Commission is likely to propose the next sanctions package that is expected to include the oil phaseout on Tuesday. The measures are then set to be discussed by EU ambassadors on Wednesday, diplomats said. The package is also likely to include penalties for additional individuals and to hit more Russian banks, such as Sberbank.