The conflicts in Iran and Ukraine are cutting oil deliveries to Europe

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Europe is now clinched between two wars that are cutting off the Old Continent from oil, and the dire straits are raising tensions in its union of nation states.

While the Iran conflict is disrupting supplies from the Persian Gulf region, the ongoing invasion of Ukraine is stopping the flow of Russian oil and making it unacceptable.

Calls from some corners of the EU for easing oil sanctions on Moscow, now that Washington has done that, are being met with resistance in Brussels, while the Kremlin threatens to slam the door first.

Europe to fund Druzhba pipeline repairs in Ukraine

Oil deliveries from Russia are becoming the apple of discord between certain EU member states that are heavily reliant on Moscow’s energy and the Brussels administration.

The Druzhba pipeline, which supplies Eastern European nations with Russian crude, has been dry since the end of January, with Ukraine blaming the stoppage on a Russian drone attack.

However, Hungary and Slovakia are accusing Kyiv of the continuing disruption. Hungarian Prime Minister Viktor Orbán, who is running in contested elections in April, says the Ukrainian government is intentionally delaying repairs.

His Slovak counterpart, Robert Fico, claims the facility in Brody, Lviv region, is not even damaged. Both leaders favor ending the war and restoring European economic ties with Russia.

Meanwhile, Ukraine accepted the technical and financial support offered by the European Union to fix the pipeline and restore oil deliveries through Druzhba.

The EU hopes this will convince Orbán to lift his veto on a €90 billion loan for Ukraine and the 20th package of sanctions against the Russian Federation.

But even if Russian oil starts flowing again, its days on the European market are numbered. Announcing the Druzhba deal on social media, the President of the European Commission (EC), Ursula von der Leyen, made that clear on Tuesday:

“Our priority is to ensure energy security for all European citizens. In this sense, we will continue to work with the concerned parties on alternative routes for the transit of non-Russian crude oil to the countries of Central and Eastern Europe.”

Brussels rules out return to Russian energy dependence

Earlier this week, the executive body in Brussels urged member states, including Hungary and Slovakia, which still have derogations for Russian oil, to prepare for its full prohibition.

European Commissioner for Energy Dan Jorgensen indicated at a briefing that the EU has no intentions to become dependent on Russian energy again, despite surging prices amid an escalating war in Iran. Quoted by Politico, he told reporters:

“It would be a mistake for us to repeat what we did in the past. In the future, we will not import as much as one molecule from Russia.”

Earlier this month, von der Leyen said that a return to Russian oil and gas would be a “strategic blunder” for the European Union, as this would make it weaker.

The EC plans to put forward a proposal for a full ban on Russian oil imports into the European Union in mid-April, on top of a phase-out of Russian gas. However, calls have been mounting to suspend sanctions on Moscow, something the U.S. has already done regarding Russian oil stranded at sea.

Belgian Prime Minister Bart de Wever insisted on Sunday that the EU must negotiate with Russia to “regain access to cheap energy.”

Completely ending oil purchases from Russia in the current situation, with rising fuel costs, “will be a serious blow to the European economy,” Hungarian Foreign Minister Peter Szijjarto warned.

In a post on X, he called on the head of the European Commission and Ukrainian President Volodymyr Zelenskyy to “stop this political theatre” and “immediately” lift the “oil blockade” on his country.

Meanwhile, the Russian government is now mulling whether to stop its energy supplies to the European market even before they are banned by the EU.

On Wednesday, the Kremlin’s spokesman, Dmitry Peskov, confirmed the matter is still under consideration as it requires an “in-depth analysis.”

President Vladimir Putin ordered the assessment earlier, stating that Russia may not wait until the door is slammed in its face but redirect its deliveries elsewhere.

In these circumstances, Europe seems to be facing increasingly limited options to ensure its energy security, at prices that would be acceptable for all of its members.

* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

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