Back to the 1980s: what the EU sanctions against Russian coal will lead to

Sergey Kondratiev wrote a column for Forbes about the EU sanctions on Russian coal supplies.

Russia's place on the European coal market will be occupied by producers from the New World and South Africa. And the Russian coal miners, Sergey Kondratiev explains, will have to develop new and more expensive export routes to Asian countries.

As part of the fifth package of sanctions against Russia, the European Commission imposed a ban on the import of Russian coal to the EU countries. The restrictions will take effect immediately: European companies can no longer enter into new supply contracts, but will receive a delay of 120 days (until early August) to fulfill existing contracts. This practice is standard when imposing sanctions and is primarily intended to reduce the shock of restrictions for European consumers. At the same time, Russian companies will not be able to use schemes to circumvent sanctions related to re-export or “mixing” with coal from third countries: restrictions will be applied based on the country of origin (not shipment) of coal.

According to the European Commission, due to the restrictions imposed, Russian coal companies could lose up to €8 billion a year, although earlier estimates were twice as low. The revision of the calculations is associated solely with technical factors - before that, Brussels was guided by the data of 2021, but the cost of coal on the world market is now noticeably higher, one and a half to two times higher than last year's peak values. The European Commission expects that Russian coal will be partially replaced by supplies from other countries, and partially by increased electricity generation from renewable energy sources.

Abandoning coal supplies from Russia in favor of imports from the US and South Africa could return the EU to the 1980s, when US coal miners dominated the European market, controlling 40-50% of all imports, and coal was the main fuel for industry and electricity. Then the Europeans made a choice in favor of natural gas supplies from the USSR, now they are in a situation with no alternative. Renewable energy instability and expensive LNG could delay coal-fired shutdowns for years, putting coal (and US exporters) back in the game.