European Union countries are at odds over how quickly they will reduce their dependency on Russian energy supplies.
While other sectors of the economy have been sanctioned, the EU remains heavily dependent on Russian oil and gas.
Germany’s economy minister said the country will be able to weather a Russian oil ban by the end of 2022 as he appears to favor tougher sanctions.
However, Hungary has opposed such a move, saying it would not support measures that could jeopardize supplies.
EU ministers met on Monday to discuss how to deal with the situation as they are under intense pressure to cut revenue streams for President Vladimir Putin’s war in Ukraine.
Member states face two main challenges – how to pay for Russian energy in a way that does not violate or undermine EU sanctions, and how to procure and develop alternative sources of supply to break away from dependence on Russia.
At a press conference on Monday, the EU’s energy chief, Kadri Simson, said Russia’s halt to gas supplies to Poland and Bulgaria had strengthened the bloc’s will to become independent of Russian fossil fuels.
But the EU has imported about £37 billion worth of fossil fuels since the conflict began, according to the Research Center for Energy and Clean Air (CREA). The two largest importers worldwide were Germany, followed by Italy.
Energy giant Gazprom last week halted gas exports to Poland and Bulgaria after those countries refused to comply with Russian demands to switch to ruble payments, and many other member countries are expected to face the same problem in mid-May.
Poland and Bulgaria had planned to stop using Russian gas this year, saying they can cope with the disruption, but it has sparked fears other EU countries, including Europe’s gas-dependent economic powerhouse Germany, could be next .
Ms Simson on Monday reiterated the European Commission’s view that paying for gas in rubles would be a “violation” of sanctions and “cannot be accepted”.
She said member states would build up gas stocks ahead of winter.
Nathan Piper, head of oil and gas research at Investec, told the BBC it was “pretty clear” that the EU wanted to “walk away” from Russian oil and gas, but added that the lack of unity was compounded by the “ability to to “causing this to really happen”.
Europe gets about 40% of its natural gas from Russia, which is also the bloc’s main oil supplier, but some countries are more dependent on Russian fossil fuels than others, so sudden supply shortages could have a huge economic impact.
For example, Germany currently gets about 25% of its oil and 40% of its gas from Russia, while Slovakia and Hungary respectively got 96% and 58% of their oil imports from Russia last year, according to the International Energy Agency.
Germany’s Economy Minister Habeck said his country had “managed to reach a situation where Germany is able to endure an oil embargo” and was “on track to do the same for gas”.
“Other countries need a little more time,” he added.
Diplomatic sources told the BBC compromises for a full block ban were being explored, particularly for countries like Hungary and Slovakia.
Mr Piper said there are more opportunities to get alternative supplies for oil compared to gas, which is most commonly transported through pipelines.
He added that landlocked EU countries also find it “more difficult” to find new sources.
He also warned that while Germany could ban oil, shutting down its Russian gas – which accounts for 40% of its total imports – would “take years”.
“Russia might leave if they want our oil, how about we reduce our gas,” he added.
“They could drive up the price, reduce volumes. They have a lot of bargaining power.”
Elsewhere, the energy research institute EWI said Germany should limit gas consumption now in preparation for the possibility of a future shutdown by Russia.
Uniper, one of Germany’s largest energy companies, also warned that an EU ban on Russian oil could prompt Russia to halt gas flows west.
The company said last week it would pay in euros, which are converted into rubles, complying with the Kremlin’s requirement that all transactions be conducted in Russian currency.
“We believe that a payment conversion that is compliant with sanctions law and the Russian decree is possible,” said a spokesman for the BBC.
Other European energy companies are reportedly preparing to do the same amid concerns about supply cuts.
In late March, Russia said “unfriendly countries” would have to start paying for its oil and gas in rubles to prop up its currency after Western allies froze billions of dollars it held in foreign currencies.
According to the decree, European importers must deposit euros or dollars into an account at Gazprombank, Gazprom’s Swiss trading arm, and then exchange them for rubles in a second account in Russia.
- Who pays for Russian gasoline in rubles?
The majority – 97% – of EU companies’ gas supply contracts with Gazprom provide for payments in euros or dollars.
Some countries are looking to turn to liquefied natural gas (LNG), with the US agreeing to ship an additional 15 billion cubic meters to Europe by the end of the year.
The US has already banned Russian oil imports and Britain plans to phase them out by the end of the year.
The EU previously developed a strategy to make it independent of Russian fossil fuels by 2030, which includes greater use of greener energy sources.
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