The European Union’s executive branch proposed a ban on Russian coal imports on Tuesday, the first EU sanctions aimed at the country’s lucrative energy sector in response to its war in Ukraine.
Ursula von der Leyen, President of the European Commission, said the EU needed to put more pressure on Russian President Vladimir Putin after what she called “heinous crimes” in the Kyiv region, with evidence that Russian troops may have killed Ukrainian civilians on purpose.
Von der Leyen claimed that the ban on coal imports is worth 4 billion euros ($4.4 billion) per year, and that the EU has already begun working on additional sanctions, such as those on oil imports.
She made no mention of natural gas, despite a 27-nation EU agreement to make the fuel used to generate electricity and heat homes more difficult to secure.
The EU imports about 40% of its natural gas from Russia, and many EU countries, including Germany, the bloc’s largest economy, oppose a gas embargo.
Europe had been hesitant to target Russian energy because of fears that it would send the European economy into a tailspin. Because of Europe’s reliance on Russian oil, natural gas, and coal, reaching agreement on energy policies is difficult, but recent reports of civilian deaths have heightened calls for tougher EU sanctions.
The United States and the United Kingdom had previously announced that Russian oil would be cut off. Individual countries have announced efforts to reduce their energy reliance on Russia: Poland announced plans to ban Russian coal and oil imports, while Lithuania announced it would no longer use Russian natural gas.
Sanctions against more individuals and four key Russian banks, including VTB, Russia’s second-largest bank, are among the other measures proposed by the EU’s executive arm.
“These four banks, which we have completely cut off from the markets,” von der Leyen said, “represent 23 percent of market share in the Russian banking sector.” “Russia’s financial system will be further weakened as a result of this.” If all 27 EU countries agree to the proposal, Russian vessels and Russian-operated vessels will be barred from entering EU ports, with exceptions for essentials such as agricultural and food products, humanitarian aid, and energy.
More targeted export bans worth ten billion euros have also been proposed in sectors such as quantum computers, advanced semiconductors, sensitive machinery, and transportation equipment.
Last year, hydrocarbons accounted for 62 percent of Russia’s exports to the EU, according to EU trade commissioner Valdis Dombrovskis.
For years, the EU has been moving away from coal because of its climate goals. Between 1990 and 2020, coal consumption decreased from 1.2 billion to 427 million tons per year, but imports increased from 30% to 60% of total coal consumption. The European Union imports about 25% of its oil from Russia, and in 2020, the EU imported 53% of its hard coal from the country, accounting for 30% of the EU’s hard coal consumption.
Because coal is transported by ship and there are multiple global suppliers, it would be easier to replace than Russian gas. In March, the German coal importers’ association stated that Russian coal could be replaced “within a few months.”
According to analysts at the Bruegel think tank, Germany and Poland are particularly reliant on Russian coal for power generation, but “Russian coal can be replaced because global markets are well supplied and flexible,” they said in March.
They did, however, add that “To replace Russian coal imports, new supply chains must be deployed quickly in order to deliver the right type of coal where it is needed. Most European coal users already have relationships with a variety of suppliers and should be able to continue to do so.”
However, the switch would result in increased import demand from Europe and higher global coal prices, with significant implications for coal-dependent emerging and developed economies.