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29th May 2022

EU mulls coal embargo on Russia, but still spares oil and gas

  • A ban on coal imports will be discussed as part of the fifth package of sanctions on Russian over its invasion of Ukraine (Photo: Wikipedia)
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EU ambassadors will discuss a new package of sanctions on Wednesday (6 April), including a ban on coal imports worth an estimated €4bn per year.

"This will cut another important revenue source for Russia," EU commission president Ursula von der Leyen told MEPs on Tuesday during the plenary session in Strasbourg.

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The proposal also includes a ban on four key Russian banks, including the country's second-largest (VTB) and restrictions on Russian vessels from accessing EU ports.

"We are working on additional sanctions, including on oil imports, and we are reflecting on some of the ideas presented by the member states, such as taxes or specific payment channels such as an escrow account," von der Leyen said, referring to a previous proposal presented by Estonia.

Until now, the EU has issued four packages of unprecedented sanctions on Russian banks and companies over its invasion of Ukraine.

But restrictive measures have found a way to circumvent Moscow's two main sources of income internationally: oil and gas exports. And these purchases are likely to carry on regardless, handing the Kremlin cash to continue its war of aggression in Ukraine.

The EU has been unable to agree on sanctions targeting energy sectors given the high dependence of some member states on Russian fossil fuels.

But Europe is less vulnerable to a reduction in coal imports than a cut in oil or gas supplies — since solid fossil fuels such as coal account for less than 10 percent of the EU energy mix.

EU countries that have shown reluctance to impose energy sanctions such as Germany seem ready to back the coal embargo — although it is still unclear whether recently re-elected Hungarian prime minister Viktor Orbán will support such move.

Russian imports accounted for about 19 percent of the EU's coal use in 2020. By comparison, the 27-bloc imported over 40 percent of its gas and nearly 37 percent of its oil from Russia.

Nevertheless, it is important to differentiate between metallurgical and thermal coal trades.

The Russian share of EU imports of the type of coal used to generate electricity — thermal coal — is almost 70 percent, while the dependence on Russian metallurgical coal used in iron and steel production is lower, according to an analysis of the Brussels-based think-tank Bruegel.

And countries like Germany and Poland are highly dependent on Russian coal imports.

Poland, for example, imports approximately 9.5 million tonnes of coal annually, mainly from Russia.

"To compensate for these shortages, Poland will have to import coal from other sources in order to prevent interruptions in the supply of energy," a Polish diplomat told EUobserver.

Experts said the coal embargo proposal responds to the gradual approach the EU has been defending in the sanctions regime against Russia since the beginning of the war.

"EU leaders want to have another economic weapon in hand should Russia escalate even further," Nick Sitter, a professor at the Central European University and BI Norwegian Business School, told EUobserver.

The EU, said Sitter, needs more time to prepare for Russian gas cuts. But any sanctions really aiming to damage the Russian economy must clearly include a gas embargo, he added.

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