Europe has imposed punitive sanctions on the Russian economy since Putin’s tanks entered Ukraine in late February, but they have not targeted Russia’s energy sector – so far. Images of unarmed civilians tied up and shot, lying along the streets of Bukha – which until recently were under Russian occupation – persuaded leaders to change course. More details on the new round of sanctions, including the timetable for the coal ban, are expected on Wednesday, when EU ambassadors will meet for talks. The measures still need the approval of all 27 Member States. Coal sanctions will bite some European countries, but they are one of the easiest sources of energy for weaning – much of the world is already doing just that. The most difficult question is: What will happen next?
How much Russian coal goes to Europe?
Russia was the world’s third-largest coal exporter in 2020, behind Australia and Indonesia, according to the International Energy Agency, with Europe by far its largest customer. The continent received 57 million tonnes of Russian coal that year, compared with 31 million tonnes for China, according to IEA figures. That was more than half of Europe’s coal that year, according to Eurostat. But the EU had already moved away from the dirtiest fossil fuels in the world. The amount of electricity generated from coal has been steadily declining across the block in recent years, falling by 29% between 2017 and 2019, according to an analysis of the Ember think tank. And despite a slight rise last year as gas prices hit record highs, the IOC expects European demand for coal to continue its steady decline. Total imports were expected to fall by 6% by 2024, even before Russia’s invasion of Ukraine. Other countries could step in to buy Russian coal. The ILO expects India’s carbon imports to increase by 4% in 2024 and more than 6% in Southeast Asia. Russia has already benefited from the jump in exports to China following Xi Jinping blocking Australian imports, the agency said in a December report.
What will the EU ban on coal prices mean?
However, a supply crisis – even gradual – could cause headaches in countries that continue to use coal for much of their electricity generation, including Poland and Germany.
The drop in supply combined with the recovery in demand in China helped push global coal prices to all-time highs in October 2021 – before falling again, according to an IEA analysis.
However, rising prices could prove more sticky under the EU ban on Russian imports. Rotterdam coal futures, the benchmark for European coal prices, closed at $ 257 a tonne on Monday, but were last seen trading at $ 295, according to the Independent Commodity Intelligence Services.
Matthew Jones, chief EU energy and coal analyst at ICIS, told CNN Business that the coal ban “will make an already tight supply situation in Europe even stricter and lead to a struggle to find alternative coal sources”. .
“Rotterdam coal futures contracts in the first month of trading on the ICE stock exchange increased by almost 15%, and on an annual basis by 13%, from yesterday’s closing in response to the news,” Jones added.
Even so, Henning Gloystein, director of energy, climate and resources at the Eurasia Group, believes EU countries can withstand the shock. The think tank also said on Tuesday that any purchase of Australian carbon from the EU would mitigate the blow.
“Imposing sanctions on coal will also make life much more difficult for European utilities, which consume a lot of Russian coal, but energy companies can handle it,” Gloystein told CNN Business.
What is left for sanctions?
Russia’s oil and gas supplies have been significantly absent since the last round of sanctions. The bloc imported 26% of its crude and 46% of its natural gas from Russia in 2020, according to Eurostat. But blocking oil imports is on the table: European Commission President Ursula von der Leyen said in a statement on Tuesday that the bloc was “working on additional sanctions, including on oil imports”. Already, the United States has exploited its strategic oil reserves, releasing 180 million barrels on the world market to help lower gasoline prices and tackle declining Russian oil reserves. The ILO also agreed to release additional oil from its member states at an emergency meeting last week. and those who want to move faster to hit the heart of the Russian economy. EU leaders have pledged to cut Russian gas consumption by 66% before the end of this year and break the bloc ‘s dependence on Russian energy by 2027. A country has gone further. Lithuanian Prime Minister Ingrida onimonytė tweeted on Sunday that “from now on, Lithuania will not consume even a cubic centimeter of toxic Russian gas.” The integration of import-dependent countries, such as Germany and Hungary, will prove more difficult. But according to Gloystein, the bloc’s reluctance to impose sanctions on oil and gas is more than just avoiding self-harm. “The EU wants to be able to continue to escalate its response in line with developments in Ukraine,” he said. “If Brussels now imposes maximum sanctions, how will it react to a further escalation by Moscow?” Gloystein also said that targeting Russian oil and gas was in danger of failing. “There are serious and credible concerns that such actions will trigger a significant escalation from Russia, as Putin may feel compelled to act drastically and quickly, knowing that the breast of war may soon dry up.” – Mark Thompson contributed to this report.
