The Morning Dispatch: Hungary Resists EU Push to Ban Russian Oil

Happy Tuesday! On this day in 1924, a 29-year-old J. Edgar Hoover was named acting director of the FBI, a role that soon became permanent—and that he wouldn’t relinquish for a staggering 48 years. Probably wouldn’t fly today!

Quick Hits: Today’s Top Stories

• President Joe Biden on Monday signed the bipartisan Ukraine Democracy Defense Lend-Lease Act into law, allowing his administration to expedite the process of sending military aid to Ukraine. Biden also issued a statement yesterday calling on Congress to separate additional Ukraine and COVID-19 funding so that the former can get to his desk “right away.” Shortly after Biden’s concession, lawmakers announced they’d reached a deal that—if finalized in the coming days—would send nearly $40 billion in additional military and economic aid to Ukraine over the next several months.

• In a speech commemorating the anniversary of Soviet forces defeating Nazi Germany in World War II, Russian President Vladimir Putin on Monday attempted to justify his continued invasion of Ukraine, claiming it was a “pre-emptive strike” that was necessary to deal with the threat of Ukrainian “neo-Nazis” backed by NATO and the United States. He acknowledged the Russian military has sustained casualties in the fighting thus far, and told soldiers they are “defending today what [their] fathers, grandfathers and great-grandfathers fought for.”

• Commerce Secretary Gina Raimondo announced Monday the Biden administration will lift tariffs on Ukrainian steel—implemented in 2018 by former President Donald Trump—for one year in an effort to boost the war-torn country’s economy. Ukraine was only the 12th-largest supplier of American steel imports in 2019, but steel exports are an economic “lifeline” for the Ukrainian people, Raimondo said.

• Sri Lanka’s Prime Minister Mahinda Rajapaksa resigned on Monday as violent and deadly protests over the country’s dire economic condition continued. All the country’s cabinet ministers reportedly also stepped down to clear the way for the formation of an “interim all-party government,” but Rajapaksa’s younger brother Gotabaya plans to remain in power as president.

• Ferdinand “Bongbong” Marcos—son of former Filipino dictator and kleptocrat Ferdinand Marcos, who was ousted and forced into exile in the People Power Revolution of 1986—appears to have been elected president of the Philippines on Monday, securing an outright majority of the vote in a preliminary count. Sara Duterte-Carpio—daughter of outgoing president Rodrigo Duterte—was elected vice president.

• Days after suggesting it’s “possible” Congress would consider federal restrictions on abortion if Roe v. Wade is overturned, Minority Leader Mitch McConnell reiterated Senate Republicans would not do away with the 60-vote threshold that would be necessary to do so. “I will never support smashing the legislative filibuster on this issue—or any other,” he said Monday.

• The State Department has announced up to $15 million in rewards for information leading to the identification and arrest of leaders in the Conti organized crime group, which it says is responsible for “hundreds” of ransomware attacks over the past two years, including a “severe” one on the Costa Rican government last month that disrupted international trade by going after the Central American nation’s customs and taxes platforms.

Who’s Holding Up The EU Push To Ban Russian Oil?

European Commission President Ursula von der Leyen made a surprise trip to Hungary Monday hoping to convince Hungarian Prime Minister Viktor Orbán to support a European Union ban on Russian oil.

No dice. “We made progress, but further work is needed,” von der Leyen tweeted. 

Oil and natural gas revenue funded 45 percent of Russia’s federal budget in 2021, according to the International Energy Agency, and the European Union has been its biggest buyer—last year it got nearly 40 percent of its gas and about 25 percent of its oil from Russia. During the first two months of Russia’s war against Ukraine, the EU imported about 44 billion euros of Russian fuel, according to the Centre for Research on Energy and Clean Air.

The sanctions package proposed last week would require most EU countries to phase out Russian crude oil within six months and refined products by year’s end, but doesn’t touch Russia’s natural gas. It would give Hungary and Slovakia until the end of 2024 to follow the embargo and the Czech Republic until June 2024, since they’re more reliant on Russian oil. Hungary, Slovakia, Bulgaria, and the Czech Republic have asked for more time, and though officials are still discussing details, Reuters reported the European Commission planned to extend their deadlines and help fund refinery updates.

But Budapest officials want a total exemption from the ban, or five years minimum to phase out Russian oil, Politico reported, as Hungary says it gets about 65 percent of its oil from Russia. Orbán has declared the current proposal an “atomic bomb” for Hungary’s economy, and Hungarian Foreign Minister Peter Szijjarto said Sunday the country wouldn’t support the sanctions package “as long as there is no solution to the problem caused by the Brussels proposal.” Former Russian President Dmitry Medvedev called Hungary’s opposition “a courageous step.”

“Orbán is a close friend of [Russian president Vladimir] Putin,” said Agnia Grigas, an energy and political analyst who in 2017 published a book about natural gas and geopolitics. “It’s definitely a political decision.” And without unanimous approval, the EU can’t pass the sanctions package—thus von der Leyen’s diplomacy trip Monday.

Hungary, Slovakia, and Croatia together in 2021 accounted for a comparatively low 7 percent of Russia’s crude oil exports to countries beyond the previous Soviet Union’s borders, so the EU’s ban could still have teeth if it allows them lots of extra time to get on board. Even the current embargo plan would take a while to sink in, but analysts at Kpler—an international research firm—predicted an EU embargo could force Russia to cut its production by about 10 percent. Russia might not mind immediately if prices keep rising as a result—it could make $180 billion in tax revenue from oil sales this year, 45 percent more than 2021, according to analysis firm Rystad Energy.

And rising prices amid already high inflation would certainly pinch European Union economies. Still, “it could be done with minimal economic consequences if it’s done properly,” Atlantic Council global energy analyst Olga Khakova told The Dispatch. “That’s why some of these countries are getting a little extra attention right now. They need a little bit of extra time. This is not being shut off tomorrow.”

The long timeline will give Russia time to find other buyers for its oil, and it will likely look to India and China. India’s imports of Russian crude have already spiked, increasing fivefold from January to April, and China’s imports have grown about 10 percent. But both countries would need years to build up the pipeline infrastructure that Russia relies on to transport much of its fuel throughout Europe. “There’s no way, short term, that Russia will be able to divert all of its European oil exports to the Asian market,” Khakova said. “That’s just not feasible.”

Another proposal in the latest EU sanctions package could cripple ocean transport to those countries—the bloc has proposed banning its companies from insuring vessels carrying Russian fuel. About 95 percent of the global fuel tanker fleet is insured by the International Group of P&I Clubs, which represents shipping insurance companies in the EU, the United Kingdom and elsewhere. “The Clubs will always comply with prohibitions on the provision of insurance and reinsurance whether in the context of Russia, Iran or other countries,” group chief executive Nick Shaw promised.

A full EU embargo is still far from a hermetic seal on Russian oil. “There are a lot of loopholes that Russia or traders could use,” Grigas told The Dispatch, noting that some processing and transport methods make it difficult to be sure what fuel is coming from Russia rather than Kazakhstan or other neighbors. “It’s hard to source the exact origin of the molecules, especially if there are interests to try to pass off Russian oil as something else.” But those edge cases would blunt, not destroy, the sanctions’ impact. And while Turkish or Middle Eastern insurance companies might still cover tankers carrying Russian oil, they’ll have leverage to charge a premium that will diminish Russian profits.

Of course, all this is moot if the EU doesn’t get the votes to pass these sanctions. Negotiations will continue this week. “Moscow is still playing this game where they’re artificially bumping up their ruble and doing these things to create this false sense of normalcy,” Khakova said. “[An oil ban] will be hard to ignore. They will definitely have a smaller budget for their aggression. That’s why it’s so important for the EU to find common ground on this. They need to get to the finish line.”

Worth Your Time

• Ross Douthat’s latest column argues the original Roe v. Wade decision in 1973 was a contributing factor to many of today’s largest societal problems: A country too deeply polarized to function, a populist right steeped in paranoia, a decay of the norms that allow republican government to operate. “It’s likely that the [abortion] debate would have been nationalized and polarized eventually no matter what,” he writes. “But the Supreme Court decision nationalized abortion politics in a very specific way, removing most abortion regulation from the realm of legislative debate and linking it to the court itself and the office of the presidency. Thereafter, instead of being fought over in the institutions that are designed to channel mass opinion and activist mobilization into stable settlements—whether state legislatures or the Congress—abortion would be bound to the all-or-nothing outcomes of presidential elections and Supreme Court nomination fights. The predictable result was an increasingly Manichaean politics: You were either for the original ruling or against it, no compromises could be negotiated or local policy experiments conducted, and the issue was distilled every few years to a referendum on presidential candidates and high court nominees.”

• Matthew Walther—editor of The Lamp—wonders if states are making a mistake in legalizing gambling. “Before the legalization of online gambling, the great majority of Americans would go their entire life without being tempted to seek out a bookie or fly to the handful of jurisdictions in which in-person sports betting was permitted,” he writes in The Atlantic. “What millions now face are endless deceptive advertisements aired during the most-watched television broadcasts in America, inviting them to risk their money on platforms funded by venture capitalists rather than by organized crime. … ​Total wagers are already in the neighborhood of $120 billion, and the Supreme Court’s ruling in favor of online gambling in 2018 is unlikely to be reversed. To shield a tiny portion of the population who engaged in behavior that might once have been considered immoral (or ‘harmful’ as many prefer to put it now) from the worst consequences of their actions, we have exposed many millions of others to an apparently mitigated version of the same hazards, and enriched powerful corporate interests in the bargain.”

• Midge Decter—one of the leaders of the neoconservative movement—died on Monday at the age of 94. Much of her work for Commentary over the years is worth reading, but we particularly recommend her 1963 essay, “Growing Old in America.” “The same modern technology that has brought about increased life expectancy has also necessitated earlier retirement,” she wrote. “No one, it might appear, could respond to these twin developments with anything but gratitude. People want to stay alive as long as possible and for as much of the time as possible in good physical condition. And it is equally natural for them to want to know that one day they will be freed from the necessity of work. … [But] it is generally assumed—probably even by the aged themselves—that the trouble lies here: in the humiliation, the sense of futility, that result from being shunted aside. Psychologists tell us that one of the main disabilities suffered in the life of retirement is a loss of self-esteem.”

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Toeing the Company Line

• It’s Tuesday, which means Dispatch Live is back tonight! Tune in at 8 p.m. ET/5 p.m. PT for another conversation with Sarah and friends about that leaked draft Supreme Court opinion and its ramifications. If you have any questions for the gang, drop them in the comments here.

• In a Dispatch Fact Check yesterday, Alec makes clear what the leaked draft Supreme Court opinion would—and would not—do. “Overturning Roe and Casey would allow states (or potentially the federal government) to ban or restrict pre-viability abortions as long as the law was rationally related to a legitimate government interest,” he writes. “Such a decision would not make abortion illegal in the United States.”

• On Monday’s episode of Advisory Opinions, David and Sarah dive ever deeper into the leaked draft Supreme Court opinion overturning Roe v. Wade, tracking the political fallout and discussing whether polling can accurately capture Americans’ nuanced positions on abortion. Plus: Does it violate the First Amendment to ban protests outside a Supreme Court justice’s home?

• On the site today, Charlotte reports that Congress is standing up to any potential Biden administration attempt to lift sanctions on Iran’s Islamic Revolutionary Guard Corps in return for Iran agreeing to a new nuclear deal. Audrey covered a Trump rally in Pennsylvania, where he has endorsed Dr. Mehmet Oz in the GOP Senate primary. Also on the site, Anthony Ruggerio looks at the agenda of incoming South Korean President and Bill Wirtz writes about Friedrich Merz, leader of Germany’s Christian Democratic Union, who is capitalizing on the ambiguity of the German government’s Ukraine response.

Let Us Know

Do you agree with Matthew Walther about legalized sports gambling? Will increased access do more harm than good? If you think it will, is it the government’s role to regulate or ban it?