ED: This article is part of the series DATACRUNCH: Sanctions by the numbers that dives into the numbers and trends of UN voting, coal, oil, gas, grain.

 

Coal was included in the EU’s fifth package of sanctions, the first time that energy has been targeted by the tough sanction regime being imposed on Russia, but it took almost a week to get the EU members to sign off on it. Coal only makes up 3% of the EU’s imports but even this tiny share of overall energy reliance on Russia proved extremely divisive. If Brussels can’t agree to ban coal, something they need to do as part of Europe’s Green Deal, then how will it be able to ban Russian oil and gas?  

After several days of closed talks a deal was thrashed out. The head of the European Commission, Ursula von der Leyen, said on April 5 that the embargo would be partial and would affect coal imports worth €4bn a year, which at current prices is no more than a third of the physical volumes of coal Russia currently exports to the EU, reports The Bell. That was later increased to €8bn by the end of the week of talks. All new contracts are prohibited as of April 8, and existing ones must be terminated by mid-August.

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

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

But within that, Russia has a stranglehold on industries that use coal both as a fuel in power stations and as an input in the steel making business; Russian coal makes up half the total coal used in the EU, even though 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 the EU's efforts to go green, but it is still important; renewables are the biggest contributor to EU power production in 2019 with a 37% share of total output, according to Eurostat, followed by nuclear (32%), which has recently been classified as a renewable energy source by the EU. Solid fuels are in third place (19%) and bigger 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 it produces itself, 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 coal briquettes were Australia ($36.4bn), Indonesia ($15.6bn), Russia ($14.5bn), the United States ($7.32bn) and South Africa ($6.37bn).

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

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

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

In addition, as part of the fifth package of sanctions the EU has closed Russian ships' access to EU ports, which will further stymie trade between the two.  

 

German coal imports

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

Germany’s overall consumption of coal has decreased a lot in recent years, as it switches to renewables as the biggest source of power generation in the country, although there was a rebound in coal use in 2021 as bne IntelliNews reported in the midst of the gas crisis last year.

However, over the past six weeks Germany has been actively scaling down its Russian coal imports that are used as a fuel to generate electricity, and was able to shift delivery chains and sign new agreements to cut its dependency in half, the Economy Ministry says. Now only 25% of the country’s coal needs are being met by Russia and the Bundestag plans to halt imports of coal altogether by the end of the summer.

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

Germany still extracts lignite (or brown coal) from opencast mines for power production on a large scale – 107.4mn tonnes in 2020 – and imports very little of this type of coal. For years, Germany was the world’s biggest producer of lignite – which emits particularly high levels of CO2 – and the country still has extensive deposits. Lignite covered about 9% of Germany’s primary energy use in 2021. Most is burned for power generation (19% of Germany’s gross electricity production in 2021) or district heating.

Due to unfavourable geological conditions, German hard coal is not competitive on the international market, and subsidised hard coal mining ended in 2018. Germany now has to import all this kind of coal, 31.8mn tonnes of it in 2021, mainly being consumed by the energy sector and in steel production. 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 one that is causing the problems, as Germany does not have its own supplies and it is the metallurgical processing industry, not the power sector, that is dependent on the import of this type of coal. The new government coalition led by German Chancellor Olaf Scholz has decided to phase out coal by 2030 but because of its importance to industry, he has been resisting including it in the fifth package of EU sanctions on Russia that was recently announced on April 5. The war in Ukraine has thrown all the government’s plans for coal into disarray, as this type of Russian coal is much harder to replace than lignite.