bne IntelliNews – DATACRUNCH: Sanctions in numbers – coal

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Coal was included in the EU’s fifth sanctions package, the first time energy has been targeted by the harsh sanctions regime imposed on Russia, but it took nearly a week for members of the EU endorse it. Coal accounts for just 3% of EU imports, but even that tiny slice of global energy dependence on Russia has proven extremely divisive. If Brussels cannot agree to ban coal, which it must do under the European Green Deal, how can it ban Russian oil and gas?

After several days of closed talks, an agreement was reached. European Commission chief Ursula von der Leyen said on April 5 that the embargo would be partial and would affect coal imports worth €4 billion a year, which at current prices would not represents no more than a third of the physical volumes of coal Russia currently exports to the EU, reports The Bell. This amount was later increased to 8 billion euros at the end of the week of talks. All new contracts are banned from April 8 and existing ones must be terminated by mid-August.

The problem is that Europe, and Germany in particular, remains very dependent on Russia for energy. Together, imports of oil, gas and coal account for around 15% of total EU imports (by value), with coal being the least important in overall energy consumption.

More than two thirds of EU energy imports in 2020 were petroleum products, followed by gas (around a quarter) and coal (less than 5%). Russia was the main extra-EU supplier in all three categories (25.5% oil, 43.9% gas and 54% solid fossil fuels), followed by Norway for natural gas and the United States for crude oil.

But within that, Russia has a stranglehold on industries that use coal both as fuel in power plants and as an input in the steel industry; Russian coal accounts for half of the total coal used in the EU, although it would be possible to replace these deliveries with thermal coal from Indonesia and coking coal from Australia.

Coal is being phased out as a fuel thanks to EU efforts to go green, but it remains important; renewables are the main contributor to EU electricity production in 2019 with a 37% share of total production, according to Eurostat, followed by nuclear (32%), which was recently classified as a source of renewable energy by the EU. Solid fuels take third place (19%) and are more important than gas (8%) and crude oil (4%).

But the use of coal varies greatly from country to country, with Poland using the most coal (77%), most of which is self-produced, followed by Estonia (62%), Czechia (52%) and Greece (49%).

And for Russia, the coal embargo would also be painful. In 2020, the top exporters of charcoal briquettes were Australia ($36.4 billion), Indonesia ($15.6 billion), Russia ($14.5 billion), the United States ($7.32 billion) and South Africa ($6.37 billion).

Russia exports most of its coal to Asia, with China being its largest customer, accounting for 13.1% of total Russian exports in 2020, followed by South Korea and Japan, both with slightly more 10% each.

But Europe accounts for a quarter of all coal exports from Russia: the EU, UK and Norway accounted for 26% of supplies in physical terms and 25% in monetary terms in 2021, The Bell reports. As most of the coal is transported by rail, it is very difficult to redirect this trade to Asia, leaving Russia without a ready market to sell the surpluses.

The governor of the major coal-producing region of the Kemerovo region, Sergey Tsivilev, has already lobbied Russian President Vladimir Putin to provide more capacity on Russia’s two major east-west rail routes – the Baikal Main Line -Love (BAM) and the Trans-Siberian. – for transit containers that can transport coal to Asia.

Furthermore, as part of the fifth sanctions package, the EU has closed Russian vessels access to EU ports, which will further hamper trade between the two.

German coal imports

Once again, Germany is the most exposed to the Russian coal trade and the biggest buyer of Russian coal in Europe: Russia accounted for half of all coal supplies to Germany in 2021 and alone accounts for just under 6% of all Russian coal exports. Along with the Netherlands, Ukraine, Poland and Italy, the top five European importers of Russian coal account for 22% of all sales.

Germany’s overall coal consumption has fallen significantly in recent years as it switches to renewables as the country’s largest source of electricity generation, although there has been a rebound in coal use in 2021 as bne IntelliNews reported amid the gas crisis last year.

However, over the past six weeks, Germany has actively reduced its imports of Russian coal used as fuel to generate electricity, and has been able to change delivery chains and sign new agreements to halve its dependence, said the Ministry of Economy. Now only 25% of the country’s coal needs are met by Russia, and the Bundestag plans to completely stop coal imports by the end of the summer.

Germany is actually a large coal producer, but the residual imports from Russia are the result of the different types of coal, which have different uses both as fuel and as an input in the metallurgical industry.

Germany still extracts lignite (or lignite) from surface mines for large-scale power generation – 107.4 million tonnes in 2020 – and imports very little of this type of coal. For years, Germany was the world’s largest producer of lignite – which emits particularly high levels of CO2 – and the country still has significant deposits. Lignite covered about 9% of Germany’s primary energy consumption in 2021. Most of it is burned for electricity production (19% of Germany’s gross electricity production in 2021) or urban heating.

Due to unfavorable geological conditions, German hard coal is not competitive on the international market and subsidized hard coal mining ended in 2018. Germany now has to import all of this type of coal, 31.8 million tons in 2021, mainly consumed by the energy sector and in the production of steel. Again, Russia is the leading supplier of hard or metallic coal (45.4% of total imports), followed by the United States (18.3%) and Australia (12.3%).

Hard coal is the problem, as Germany does not have its own supplies and it is the metal processing industry, not the electricity sector, which depends on the import of this type of coal . The new coalition government led by German Chancellor Olaf Scholz has decided to phase out coal by 2030, but due to its importance to the industry, he resisted inclusion in the EU’s fifth sanctions package. EU vs. Russia which was recently announced on April 5th. the war in Ukraine upset all government plans for coal, as this type of Russian coal is much more difficult to replace than lignite.

Ukrainian coal imports

Ukraine faced similar problems to Germany, as it became dependent on Russian coal imports. Much of Ukraine’s coking coal, which it needs to run its large metallurgical industry, is now trapped in the disputed Donbass region and under the control of separatists. This has left kyiv in the difficult position of being forced to import coal from Russia to run both its steel mills and power plants despite an undeclared eight-year war with its larger neighbor. Almost two-thirds of coal imported by Ukraine comes from Russia and occupied parts of Donetsk and Luhansk oblasts, Radio Free Europe/Radio Liberty previously reported.

In April 2019, the Russian government decided to restrict coal exports, including coking coal, to Ukraine from June 1, only allowing such exports with permits issued by the Russian Ministry of Development economic. In 2020, Ukraine imported 9.5 million tons of coal from Russia, out of a total import volume of 17 million tons. In the first nine months of 2021, imports from Russia increased to 10.3 million tonnes.

Kyiv countered with various bans and duties were imposed on Russian coal in 2020, but anthracite coal, bituminous coal and coking coal for the metals industry were all exempted, along with lean coal for companies producing electricity and heat. Like Germany, Ukraine is struggling to do without imports of Russian coal to power some of its main industries. To overcome the shortages, Ukraine had to resort to expensive coal imports from the United States at the end of 2021.

Poland faced similar problems. In April, Warsaw declared itself ready to wean itself off imported coal in just a few weeks. Poland is one of the largest consumers of coal in Europe, which dominates its power generation business.

One of Russia’s most ardent enemies, the Polish parliament banned the import of Russian coal on April 7, the first step in a plan to end imports of Russian energy products by the end of the year. ‘year. Russian coal imports accounted for 75% of Poland’s coal purchases abroad in 2020 and amounted to more than 9 million tonnes.

Although Poland gets around 70% of its electricity from state-controlled coal-fired power plants, coal imported from Russia is mainly produced by private companies that supply heating installations in households and businesses. Russian coal is cheap and meets the quality standards required for heating.

The ban states that entities operating in Poland must not import coal or transport it through Polish territory. Violation of the ban would be punishable by a fine of up to PLN 20 million (€4.32 million).

Poland has repeatedly called on the EU to impose a bloc-wide ban on imports of Russian oil, gas and coal, but with little success as Germany and Hungary oppose to the ban, fearing its economic consequences.


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