Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

EU Proposes Ban on Coal Imports from Russia

Tue 05 Apr 2022 | 06:30 PM
Ahmad El-Assasy

The European Union has suggested a ban on Russian coal imports, which would be the first penalties aimed at the country's wealthy energy sector in response to its conflict in Ukraine.

Ursula von der Leyen, the chairperson of the European Commission, said the EU needed to put more pressure on Russian President Vladimir Putin following what she called "heinous crimes" committed near Kyiv, with indications that Russian troops may have killed Ukrainian civilians on purpose.

Ms von der Leyen stated that the coal import embargo will cost the EU €4 billion per year, and that the EU has already begun working on additional penalties, including oil import bans.

Taking a firm stance is critical not only for Europe, but also for the rest of the globe.

She made no mention of natural gas, despite a 27-nation EU agreement to make the fuel used to generate electricity and heat houses more difficult to acquire.

The EU receives around 40% of its natural gas from Russia, and many EU members, particularly Germany, the bloc's largest economy, are opposed to gas import restrictions.

Europe had been hesitant to target Russian energy because of fears that it would send the European economy into a tailspin, but new allegations of civilian deaths have heightened calls for stiffer EU penalties.

“To take a clear stand is not only crucial for us in Europe but also for the rest of the world,” Ms von der Leyen said. “A clear stand against Putin’s war of choice. A clear stand against the massacre of civilians. And a clear stand against the violation of the fundamental principles of the world order.”

Sanctions on additional persons and four significant Russian banks, including the second-largest, VTB, are among the other measures proposed by the EU's executive arm.

“These four banks, which we now totally cut off from the markets, represent 23% of market share in the Russian banking sector,” Ms von der Leyen said. “This will further weaken Russia’s financial system.”

If all 27 EU countries agree to the idea, Russian vessels and Russian-operated vessels will be barred from entering EU ports, with exceptions for needs such as agricultural and food items, humanitarian relief, and energy.

Export bans worth €10 billion have been proposed in sectors such as quantum computers, advanced semiconductors, sensitive machinery, and transportation equipment.

Ms von der Leyen said: “With this, we will continue to degrade Russia’s technological base and industrial capacity.”

According to EU trade commissioner Valdis Dombrovskis, 62% of Russia’s exports to the EU were hydrocarbons last year.

“If we really want to affect Russia’s economy, that’s where we need to look,” he said. “And that’s exactly what is subject to discussions concerning this sanctions package.”

The EU has been shifting away from coal in order to meet its climate goals. Between 1990 and 2020, coal use decreased from 1.2 billion to 427 million tonnes per year, but imports increased from 30% to 60% of total coal consumption.

To replace Russian coal imports, new supply chains must be deployed quickly in order to provide the proper type of coal where it is needed.

The European Union imports roughly 25% of its oil from Russia, and in 2020, the EU imported 53% of its hard coal from the country, accounting for 30% of the EU's hard coal usage.

Because coal is transported by ship and there are several global suppliers, it would be easier to replace than Russian gas.

In March, the German coal importers' group stated that Russian coal might be substituted "within a few months."

Analysts at the Bruegel think tank said in March that Germany and Poland were particularly reliant on Russian coal for power generation and that “Russian coal can be replaced because global markets are well supplied and flexible”. But they added that “replacing Russian coal imports will require the lightspeed deployment of new supply chains to bring the right type of coal where it is needed. Most European coal users already source from different suppliers and should be able to build on existing relationships”.

However, the transition would result in increased import demand from Europe and higher global coal prices, with substantial implications for coal-dependent emerging and industrialised nations.