By Francesco Guarascio

BRUSSELS (Reuters) – The European Commission is considering offering landlocked states in the European Union’s east more money to upgrade oil infrastructure to convince them to agree to an embargo on Russian oil, it said on Monday. an EU source told Reuters.

The measures are part of a broader package of new sanctions against Russia for its invasion of Ukraine, but passing the legal text still requires agreement on the size of the investment, the source said, adding that Another sticking point was Cyprus’ concerns over a proposed ban on the sale of real estate to Russians.

The horse trade after the Commission presented its original sanctions document last week delayed approval and the text has already been revised once to try to win over doubters.

A new version, currently being drafted, is likely to remove a ban on European tankers carrying Russian oil, after pressure from Greece, Cyprus and Malta, the source said, declining to be named due the sensitivity of the issue.

EU companies would, however, be barred from offering insurance and other financial services for transporting Russian oil around the world, the source added, noting that the initial proposal would remain unchanged on this point.

While most EU states will have to fully implement a Russian oil embargo by the end of the year, Hungary – one of the most vocal critics of the new sanctions package – has already won a exemption until the end of 2024, just like Slovakia, and the Czech Republic would have until mid-2024.

The three countries are the only states in the eastern EU without access to the sea and therefore risk a greater economic impact by banning Russian oil.

EU officials say their concerns are legitimate and are now considering spending more than originally planned to upgrade and expand pipelines that would bring oil from other EU countries.

The source declined to comment on the size of the investment, but noted that it should not be calculated in billions of euros, rather much less.

The EU is withholding 7.2 billion euros ($7.5 billion) in EU post-COVID recovery funds from Hungary due to rule of law concerns, and diplomats have said that Budapest could try to link oil embargo talks to the disbursement of blocked funds.

Rejecting this, the source said that additional funding would be provided for investment in pipelines and that there was still debate on whether this money could also be used to upgrade oil refineries in the Eastern European countries, many of which can currently only handle Russian oil.

CYPRUS

The other open question concerned Cyprus, where many Russians have invested in real estate, which the EU wants to ban under the new proposals.

Talks are underway on legal issues that would allow a compromise on this, the source said.

The ban on insurance and other financial services for tankers carrying Russian oil is seen as a potential serious obstacle to Russian oil exports to China and other trading partners outside the EU, but it is not known in how effective it would be.

“Countries with less stringent sanctions protocols may be able to import Russian oil using their own flagged vessel and their own domestic insurance arrangements,” said Marcus Baker, global head of marine and cargo. for insurance broker Marsh.

($1 = 0.9486 euros)

(Reporting by Francesco Guarascio in Brussels; additional reporting by Carolyn Cohn in London; Editing by Alex Richardson, Mark Potter, Kirsten Donovan)