EU Commission has come forward with its oil embargo plan

HUNGARY - In Brief 04 May 2022 by Istvan Racz

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Just as expected, the EU Commission revealed its plan to ban oil imports from Russia this morning. Still today, this proposal is set to be discussed by the ambassadors of member states to the EU, a key event to allocate the burden of the embargo.According to the proposal, the imports of crude oil from Russia should be stopped completely in six months after the decision, and the similar imports of refined oil products should be discontinued in nine months. Essentially, this means a full ban on oil imports from Russia by end-2022. In itself, this would be terribly negative for Hungary, but as some news agencies reported referring unnamed sources, Hungary and Slovakia would get a temporary exemption on the imports of Russian crude oil until end-2023. The has been no word so far on what would happen to the imports of refined products in the case of these two countries. Another correspondent has reported that Austria and Czech Republic, the other two EU members of significant size without a sea connection and material domestic sources of oil, also insist on getting some temporary exemptions.For Hungary, one problem is that without oil imports from Russia, the currently sizeable Urals-Brexit price difference would be lost, and in that case the existing administrative price control for retail fuel prices would have to go as well. As we said previously, this would mean much higher domestic inflation, given current circumstances. The good news would be if this happened only from early 2024.The other problem is the technological incompatibility of two of MOL's total three refineries with non-Russian crude oil types, except for Arab Light, which on the other hand could not be pro...