Business News for April 7, 2022
A train carrying coal in Yekaterinburg, Russia. The European Union relies on Russia for 47…
European leaders, seeking to punish Russia for reports of atrocities carried out in Ukraine, on Thursday approved a ban on Russian coal, the imported energy source that would be the easiest to replace.
Initially expected to arrive on Wednesday but delayed by extended deliberations among European Union officials, the latest round of sanctions from the bloc included a plan for cutting off Russian coal over four months. The original proposal had suggested a shorter, three-month withdrawal.
The slight slowdown in the decision-making process reflected the challenges of reaching agreement among all 27 member nations on the penalties, particularly given that some countries in the bloc are more reliant on Russian energy than others. Sanctions need to be approved by all member states.
And there were concerns that cutting off coal supplies could cause more harm to the European Union than to Russia. Though the European Union depends on Russian coal, the bloc could replace it more easily with imports from other countries than it could replace natural gas and oil. But banning coal from Russia could send energy prices soaring for European consumers, given the existing shortages in the bloc, according to Rystad Energy, a consulting firm. Carlos Torres Diaz, a senior vice president at Rystad, called the potential sanctions “a double-edged sword.”
Imports from Russia accounted for 47 percent of coal coming into the European Union in 2019, according to the European Union’s statistics office, Eurostat, making the country the most important supplier of the fuel. That amounts to four billion euros worth of coal annually, Ursula von der Leyen, the European Commission president, said.
Each member state has different energy needs, and among those most dependent on Russian energy overall is Germany, the bloc’s largest economy. Roughly half of all coal that Germany imports comes from Russia, last year totaling €2.2 billion, according to government figures. Most is used to generate electricity and power Germany’s steel industry.
Lignite, or brown coal, the only fossil fuel that is still mined in Germany, is burned to generate power. It is also the dirtiest fossil fuel, lending urgency to efforts to cease burning coal. But 2021 proved to be less windy than expected, hurting the country’s wind power efforts and leading to a nearly 5 percent increase in coal-generated power for the year.
Chancellor Olaf Scholz’s government laid out plans last year for the country to quit coal by the start of the next decade, and in the past month, Robert Habeck, the vice chancellor and economy minister, has said Germany will aim to wean itself off Russian coal by the end of the summer.
“How we will carry out a coal embargo is well prepared,” Mr. Habeck said Wednesday.
Diplomats in Brussels said Germany and other countries had been asking during negotiations for more time to complete current orders and wind down existing contracts before enforcing the measure.
German companies have already renegotiated contracts with other countries that export coal, Mr. Habeck said. But shipments that have already been ordered and are underway from Russia would not be stopped or turned back, he added. “If we turned those ships back, then we could face a shortage,” he told reporters in Berlin.
Coal from the United States, Colombia and South Africa could help plug the gap left by cutting out imports from Russia, according to the German Coal Importer Association, an industry group representing companies that depend on coal supplies from abroad.
In a telephone call on Wednesday, Mr. Scholz and the president of Colombia, Iván Duque Márquez, discussed the war in Ukraine and energy, the chancellor’s office said.
Australia provided nearly one-third of the European Union’s coal imports in 2019. Australian markets have already reported a surge in their coal prices, as companies in Europe have turned to them to inquire about fuel.
Poland is the E.U. country that still relies most heavily on coal. While much of the country’s coal is mined domestically, roughly 20 percent was imported from Russia last year.
Last month, Poland’s prime minister, Mateusz Morawiecki, proposed legislation to ban imports of coal from Russia.
Cutting off Russia’s oil and natural gas will prove to be much more difficult. Germany has already reduced its dependence on gas from Russia by 15 percent in the first three months of the year, according to Mr. Habeck. But industry leaders have warned against imposing sanctions on Russian natural gas, saying it could lead to substantial job losses in the chemical, mining and pharmaceutical sectors.
Mr. Habeck presented draft legislation for speeding up Germany’s expansion of renewable energy, focused on generating more through wind and solar power.
But it will take several years before new terminals are built that would allow for liquefied natural gas to arrive by ship, offering a replacement for Russian gas coming via pipeline. And even if the approval processes are streamlined, it could take years before the terminals are able to replace the nearly 22 percent of Germany’s energy mix that comes from natural gas.
Matina Stevis-Gridneff contributed reporting.
