EU fails to agree on Russian oil ban as leaders gather for summit

By Gabriela Baczynska and Ingrid Melander

BRUSSELS (Reuters) -EU countries failed to agree on a Russian oil import ban despite last-minute haggling before a summit got under way in Brussels on Monday, exposing a struggle to widen sanctions on Moscow over its war in Ukraine as the economic risk for Europe grows.

The leaders of the 27 European Union countries will agree in principle to an oil embargo, a draft of their summit conclusions showed, but they will leave the practical details and hard decisions until later.

The EU has rolled out five packages of sanctions against Russia since the conflict began more than three months ago, demonstrating uncharacteristic speed and unity given the complexity of the measures.

But an agreement on oil sanctions has proved elusive for weeks because so many countries depend on Russian crude.

"There is no compromise for this moment at all," said Hungarian Prime Minister Viktor Orban, whose country has been the main holdout for a deal, as he arrived for the two-day summit.

European Commission President Ursula von der Leyen, who proposed the latest package of sanctions at the start of May, agreed: "We're not there yet."

There is broad agreement on the rest of the package, including cutting Russia's biggest bank, Sberbank, from the SWIFT messaging system, banning Russian broadcasters from the EU and adding people to a list whose assets are frozen.

But a senior European Commission official said the whole package, including oil, should be approved in one go.

Estonian Prime Minister Kaja Kallas said it was more realistic to expect an agreement on an oil embargo in a few weeks, hopefully at the EU's next summit on June 23-24.

Some complained harshly over the lack of deal.

"We're getting a little bogged down in all of the details and we're forgetting the big picture," Latvian Prime Minister Krisjanis Karins said. "It's only money. The Ukrainians are paying with their lives,"

LANDLOCKED

The draft text seen by Reuters - which may still be revised again - would confirm that the sixth package of EU sanctions will include a ban on seaborne oil imports, with pipeline oil supplied to landlocked Hungary, Slovakia and the Czech Republic to be sanctioned at some later point.

However, the leaders will ask diplomats and ministers to finalise an agreement that would also ensure fair competition between those still getting Russian oil and those cut off.

Orban said Hungary would be ready to back a deal "if there are solutions for the Hungarian energy supply security, we haven't got that now".

Hungary receives Russian oil via a pipeline that runs through Ukraine.

One tangible outcome of the summit should however be agreement on a package of EU loans worth 9 billion euros ($9.7 billion), with a small component of grants to cover part of the interest, for Ukraine to keep its government going and pay wages for about two months.

Leaders will also back the creation of an international fund to rebuild Ukraine after the war, with details to be decided later, and will touch on the legally fraught question of confiscating frozen Russian assets for that purpose.

The leaders will pledge to accelerate work to help Ukraine move its grain out of the country to global buyers via rail and truck as the Russian navy is blocking the usual sea routes, and to take steps to faster become independent of Russian energy.

The draft showed leaders would explore ways to curb rising energy prices, including the feasibility of introducing temporary price caps, to cut red tape on rolling out renewable sources of energy and invest in connecting national energy networks across borders to better help each other.

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