The 27 EU members agreed a new sanctions package late on Monday covering more than two-thirds of Russian oil imports to the bloc, European Council President Charles Michel announced.
Michel said on Twitter the arrangement covers more than two-thirds of oil imports from Russia, "cutting a huge source of financing for its war machine. Maximum pressure on Russia to end the war."
The bloc also agreed on removing Sberbank from the SWIFT international payment system. Sberbank is Russia's largest bank and is majority state-owned.
Leaders of the 27 EU member states met for a two-day summit in Brussels on Monday with the aim of sealing an agreement on finally imposing an embargo on Russian oil likely to top the agenda.
Ukrainian President Volodymyr Zelenskyy, who has repeatedly called on the EU to halt all fossil fuel imports from Russia, addressed the summit by video link.
"All quarrels in Europe must end, internal disputes that only encourage Russia to put more and more pressure on you," Zelenskyy said.
"It is time for you to be not separate, not fragments, but one whole," he said, calling for new sanctions and an oil embargo.
The planned sixth round of sanctions against Moscow following its invasion of Ukraine has been stalled for almost a month over tense disagreements within the bloc due to varying levels of dependence on Russian-sourced energy.
Hungary is leading the members in opposition, including Slovakia, the Czech Republic and Bulgaria, who say they cannot halt imports.
However, the EU's foreign policy chief Josep Borrell was optimistic despite the "tough talks yesterday afternoon, as well as this morning," telling broadcaster France Info on Monday morning that: "I think that this afternoon, we will be able to offer to the heads of the member states an agreement."
His sentiments were mirrored by German Chancellor Olaf Scholz. "No one can predict whether it will actually be the case, but everything I hear sounds as if there could be a consensus sooner or later," he said upon arriving in Brussels.
This view was countered by Estonian Prime Minister Kaja Kallas who said: "I don't think we'll reach an agreement today." Kallas suggested it might still take weeks, as did her Belgian colleague Alexander de Croo.
Hungarian Prime Minister Viktor Orban, one of Russian President Vladimir Putin's closest allies within the EU, had demanded that the oil embargo question be taken off the summit's agenda. His country relies on Russia for 60% of its oil and 85% of its natural gas.
One solution that has been floated is to impose sanctions only on oil transported by ships and leave the Druzhba pipeline that feeds Slovakia and Hungary untouched.
Orban called this a "good approach" on Monday, but insisted that Hungary "has to have the right to get Russian oil from other sources" in case "something happens to the pipeline carrying Russian oil." This is "something that the Ukrainians and others have spoken about," the right-wing nationalist leader said.
However, banning oil by ship would trigger a price surge that would hit countries such as Belgium, the Netherlands and Germany, forcing them to pay more for oil than Hungary.
European Commission President Ursula von der Leyen said on Monday that the important point was to not unfairly burden certain EU members, adding that "this exact question has not yet been solved."
Before heading into the meeting, Orban stressed that "there is no agreement at all" on a possible Russian oil ban after blaming the Commission for proposing the measures "out of the blue."
Reinhard Bütikofer, a member of the European Parliament's Foreign Affairs Committee with Germany's Green party, told DW that "I don't think we should fantasize about moving around Hungary."
"They have us at a position where we need to negotiate to achieve a common proposal that can be supported by all 27 member states," he said.
Bütikofer said that the Commission has tabled a proposal that takes into account the "justified interests of Hungary and other landlocked nations."
