On Energy, the EU Is Stuck Between a Rock and a Hard Place

On Wednesday, I asked whether the EU’s proposed embargo on Russian oil – to be phased in over the next six to eight months – really makes sense.

It now seems the proposal may be dead in the water, as Hungary has said it will exercise its veto. Speaking to the BBC, the country’s Secretary of State for International Communication and Relations described the proposal as “unacceptable”, claiming it would “ruin the Hungarian economy”.

Prime Minister Viktor Orban, who compared the proposal to dropping an “atomic bomb” on the Hungarian economy, said his country would need five years to transition away from Russian oil, adding that one and half years is “not enough for anything”.

As the FT explains, oil imported from Russia isn’t refined in the same way as oil imported from other sources, so massive investments would need to be made in Hungary’s refineries to process the new oil. Hungary currently gets 65% of its oil from Russia, as well as 85% of its gas.

According to Reuters, Orban also questioned “whether it was wise to make investments on that scale for a result in four to five years time, while the war in Ukraine was happening now”. As I noted in my post on Wednesday, the proposed embargo is unlikely to have much impact on the war itself.

Meanwhile, 11 former Brussels policy chiefs (including former Commission President Romano Prodi) have written to EU leaders, warning that the bloc must not make long-term commitments to alternative fossil fuel providers while it seeks to reduce its dependence on Russian oil.

Doing so, the petitioners say, “will only serve to maintain EU energy dependence on other countries, many of which do not respect EU values”. Again, as I noted on Wednesday, it’s not clear that alternative suppliers of oil – like Saudi Arabia or the U.A.E. – are any more ‘moral’ than Russia.

Rather than making costly investments in fossil fuel infrastructure (of the kind that Hungary would require to process non-Russian oil), the petitioners call for a “drastic reduction in fossil fuel use in line with climate goals”, as well as a “massive expansion of wind and solar farms”.

Their proposal chimes in with the Eurocrat who recently told a group of EU policymakers that Europeans “need to pay more for energy” because we have “created enormous wealth at the expense of planet Earth”.

Of course, replacing Russian fossil fuels with renewables would take even longer, and be even more expensive, than replacing them with Middle Eastern oil and American natural gas. But the petitioners raise a good point: if the EU does intend to phase out fossil fuels, why make costly fossil fuel investments now?

Unfortunately, the EU is stuck between a rock and a hard place. If it wants to achieve its climate goals, it needs to put all its eggs in the renewables basket. But if it wants to reduce its dependence on Russia, it needs to spend a lot of money on fossil fuel infrastructure – money it could have spent on renewables.