EU envoys expect to resolve block of new Russia sanctions this week

BRUSSELS (Reuters) -European Union diplomats said they expect to reach a deal during an EU summit this week on an 18th package of sanctions against Russia, which Slovakia and Hungary are using as a bargaining chip for concessions on Russian energy.

The European Commission has proposed the package in an effort to push Russia to negotiate a ceasefire with Ukraine after EU leaders called for "massive sanctions" in May. The package targets more of Russia's energy revenues by listing banks and hitting its shadow tanker fleet.

On Monday, Hungary and Slovakia said they would not support the new sanctions without changes to the proposal to ban imports of Russian energy by 2027.

EU leaders will discuss the ban at a European Council on Thursday and Friday in Brussels.

"We are waiting for the outcome of Thursday’s summit, and I believe that the conversation after Thursday will be much easier," said Ignacy Niemczycki, a Polish minister for the EU.

"We remain optimistic."

However, Slovak Prime Minister Robert Fico reiterated his position that a vote should be delayed until concerns over the energy ban are resolved, and said he was ready to block the sanctions if Slovakia's concerns were not addressed.

Slovakia argues that cutting off Russian pipeline gas will raise prices, especially in central Europe. It also wants a mechanism to cap EU transit fees, and guarantees in case of a gas shortage, Economy Minister Denisa Sakova said last week.

An EU diplomat familiar with the discussions said Slovakia and Hungary want "different treatment for landlocked countries".

One diplomat added: "Hungary is not a problem. If Slovakia lets it go, so will Hungary."

Slovak state-owned gas importer SPP said Russian gas giant Gazprom may demand compensation despite a declaration of force majeure by SPP if the EU bans imports. SPP says its Russian gas deal ending in 2034 is worth about 16 billion euros ($18.6 billion) at current prices.

Lawyers have cautioned it will be difficult to eliminate the risk of claims if the Commission goes through with its plan to use trade measures for the ban rather than formal sanctions, which would require unanimity.

"We have been working very closely with the member states most concerned by the phase-out,” a European Commission spokesperson said.

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(Reporting by Julia Payne, Jan Strupczewski, Jan Lopatka and Marek Strzelecki; Editing by Kevin Liffey)