On Tuesday, the European Commission proposed a phase-out ban on Russian coal imports worth 4 billion euros ($ 4.3 billion) a year as part of the Fifth Amendment sanctions designed to further reduce the war front of Russian President Vladimir Putin. Other projects are targeting Russian technology and manufacturing imports, as well as 10 billion euros ($ 10.9 billion).
Further details on the new round of sanctions, including the deadline for the ban on coal, are expected when EU ambassadors meet on Wednesday. These measures still require the approval of 27 member states.
Allowing coal will bite some European countries, but it is one of the easiest energy sources – most of the world is already doing just that. Tricky question: What happens next?
How much Russian coal goes to Europe?
Russia was the world’s third-largest coal exporter by 2020, after Europe and Indonesia, Europe’s largest consumer, according to the International Energy Agency.
The continent received 57 million tonnes of Russian hard coal that year, compared to 31 million tonnes for China, according to IEA data. According to Eurostat, it accounted for more than half of Europe’s coal that year.
But the EU was already moving away from the world’s dirty fossil fuels.
The amount of electricity generated by coal has declined steadily across the block in recent years, which has dropped by 29% between 2017 and 2019, according to Ember Analysis, an energy think tank.
And the IEA expects European demand for coal to continue its steady decline, despite a brief rise last year as gas prices hit record highs. Even before Russia’s invasion of Ukraine, total imports were expected to fall by 6% in 2024.
What does the EU ban on coal prices mean?
However, the supply crisis – even if it is a phase – could be a headache for countries that use coal for most of their electricity generation, including Poland and Germany.
According to an IEA analysis, supply declined and demand in China rose again, helping to push global coal prices to an all-time high in October 2021.
But higher prices will be sticky under the EU embargo on Russian imports. Rotterdam Coal Futures, the benchmark for European coal prices, closed at $ 257 a tonne on Monday, but last traded at $ 295, according to data from Independent Commodity Intelligence Services.
Matthew Jones, a leading analyst for EU power and carbon at ICIS, told the CNN trade that the coal embargo “will further tighten the already tight European supply situation and lead to a struggle to find alternative coal sources.”
“Rotterdam’s coal futures increased by almost 15% in the month before trading on the ICE exchange and 13% in the previous year, in response to news from yesterday’s close,” Jones added.
Still, Henning Gloystein, director of the Eurasia Group’s Energy, Climate and Resources, thinks the EU will be in for a shock. On Tuesday, the think tank said that the EU’s purchase of Australian coal would ease the blow.
“Allowing coal will make life more difficult for European utilities, which use more Russian coal, but energy companies can cope,” Klostein told CNN Business.
What is there to get permission?
Russia’s oil and gas supplies have not been significantly affected by the recent round of sanctions. According to Eurostat, it imported 26% of its crude oil and 46% of its gas from Russia by 2020.
But blocking oil imports is on the table: European Commission President Ursula van der Leyen said in a statement on Tuesday that “additional sanctions, including oil imports, are being worked out.”
A country has gone further. Lithuania’s Prime Minister Ingrida Šimonytė said in a tweet on Sunday that “Lithuania no longer consumes a single centimeter of toxic gas.” Getting to import-based countries like Germany and Hungary can be very challenging.
But, according to Klostein, the group’s reluctance to allow oil and gas is more than just avoiding self – harm.
“The EU is keen to continue to increase its response to developments in Ukraine,” he said. “Now that Brussels has implemented maximum sanctions, how does it respond to Moscow’s further expansion?”
Klostein also said that the targeting of Russian oil and gas was a risk of retreat.
“There are serious and credible concerns that such actions could provoke a significant expansion of Russia, as Putin may be forced to act harshly and swiftly, knowing that his war chest may soon dry up.”
– Mark Thompson contributed to this report.