Germany is prepared to back a gradual ban on Russian oil as European Union countries scramble to respond to an escalating energy crisis that saw Moscow cut off gas supplies to two of the bloc’s member states on Wednesday. 

Berlin would support a phased approach to targeting oil rather than some of the other options that have been discussed, such as a price cap or payment mechanisms to withhold parts of Moscow’s revenue, according to people familiar with talks among EU ambassadors. 

The ban would also need to come with a transition period, said the people, who asked not to be identified because the negotiations are private. The EU took a similar, delayed approach when it banned coal earlier this month.

Germany’s new stance marks a significant shift for a country that as recently as a few weeks ago was arguing that any action on energy supplies would hurt Europe more than Russia. It’s also a signal that Germany feels significantly more prepared to tap alternative sources for oil supplies.

The EU is currently working on its sixth sanctions package with consultations among member states expected to take place over the next few days, according to the people. Formal proposals could be put forward for approval as early as next week. A final decision on the precise mechanics of how the bloc will target oil has yet to be finalized, one of the people said.

The German Economy Ministry could not immediately be reached for comment.

Polish Proposal

EU sanctions require unanimity and could be a political minefield for some member states. 

Agreeing on the duration of any transition period on an oil ban will be particularly complicated, with several member states pushing to take action sooner rather than later.

Poland, which is among those backing tougher measures, plans to propose a carbon market-like mechanism at the next EU summit to provide a guarantee that the bloc will phase out Russian fossil fuels, according to Climate Minister Anna Moskwa. It will also be an incentive for those ready to shift away from Russian energy sooner.

The proposed mechanism could apply to both oil and gas, according to a separate person. 

The mechanism would define a reduction pathway by setting a date at which the use of energy sources from Russia should be zeroed out. Each member state would get assigned a quota of fossil fuels that it can import and those wanting to use more would have to buy permits to do so from those who use less than their limit. Revenues from such a program could be used to help Ukraine or to aid the diversification of energy sources.

Tariffs, Restrictions

Other alternatives to a ban that have been discussed include tariffs and restrictions on some oil products. One of the people said the package could also include a combination of measures as one of the key goals was to make sure that Russia’s revenue—and not Europe’s economies—are hit hardest by any action. U.S. officials have voiced concerns that an outright EU ban on Russian oil could see prices skyrocket and give the Kremlin even more revenue. 

The discussions come as Moscow announced on Wednesday that it would cut gas supplies to Poland and Bulgaria after the two countries refused to pay for the shipments in rubles as demanded by Russian President Vladimir Putin.

Putin’s demand stipulates that European gas buyers open two accounts with Gazprombank JSC, one in a foreign currency and one in rubles. Gazprombank would then be responsible for converting the foreign currency into rubles and transferring the money to Gazprom.

The EU has said that the payment procedure asked for by the Kremlin would be a breach of contracts and sanctions, while at the same time clarifying that it might allow for payments to continue in euros and dollars provided that it is clear that legal obligations end once the initial euro or dollar payment is made to Gazprombank.

“It’s very clear and the request from the Russian side to pay in rubles is a unilateral decision and not according to the contracts,” European Commission President Ursula von der Leyen told reporters on Wednesday. “Companies with such contracts should not accede to the Russian demands. This would be a breach of the sanctions so a high risk for the companies.”

At the meeting of ambassadors Wednesday, envoys for Poland and Bulgaria told colleagues that their countries have significant gas reserves so they are not excessively concerned about Russia’s move, according to an EU diplomat. Several member states expressed political support for the two countries, but no decisions were taken on what specific measures to adopt, the diplomat added.

Germany has suggested that it can continue to pay for its gas in euros as outlined by the EU’s guidance. 

Germany could face a 220 billion-euro ($232 billion) hit to output over the next two years should the gas supply be cut immediately, according to a joint forecast of economic institutes.