Where to Find Replacement for Russian Coal and How Much It Will Cost EU States

Last year, the European Union secured 15% of electrical energy from coal, and a fifth of that energy source was imported from Russia. The ban on the import of coal is the backbone of the fifth set of sanctions of Brussels against Russia, adopted this month. The member states are dependent on coal to varying degrees, so the implementation of that embargo has been postponed until August.

Although EU states say that they do have a replacement for that Russian energy source, the question remains how much it will cost.

The biggest importer of Russian coal in the EU is Germany, followed by the Netherlands and Italy, and then Poland, which has already banned the transport of coal from Russia in its territory as well, RTS reports.

Although most countries have short-term agreements which match the deadline of the implementation of that embargo, there are also members whose agreements are signed for a period of one year, so there are already speculations about whether the implementation could be prolonged until they expire.

Zeljko Markovic, Energy & Resources Leader at Deloitte, says that opinions are divided – some believe that the lack of imports can be compensated for, whereas others believe that it will be difficult.

– Regarding coal in particular, there’s a prediction by the German Coal Importers Association that they will be able to carry out the replacement of coal in two to three months. The deadline has been moved for that reason. Initially, the ban on imports should have taken place in June, and now it’s been moved to August 10 – Markovic says for RTS.

That it is not easy to find a replacement for Russian coal is shown by the example of Great Britain, which, unlike the EU, announced the stopping of the import of the Russian energy source for the end of the year.

Due to the energy crisis, certain EU states have also postponed the closing of thermal power plants, and coal storage sites have been emptied and need to be filled out quickly for the next heating season, because the prices are not steady.

– The stone coal that is imported, whose import is now being banned, was at below EUR 60 per ton, and now it is more than EUR 300 per ton – Markovic adds.

A replacement for coal from Russia is also being sought in the USA, Africa and Australia.

Experts are warning that coal will also be much more expensive due to transportation costs as well. Replacements for coal from Russia are also being sought in: America, Africa, Australia, Indonesia, Mozambique and Colombia.

Many countries are already exhausted financially, and the situation is additionally complicated by the fact that, in addition to coal, the fifth set of sanctions also encompasses the transport of goods from Russia, but also Belarus.

– We are still trying to cope with the Covid-19 crisis and this additional problem with Ukraine and Russia has already led to higher prices. There’s a possibility that it could lead to a global recession or perhaps some localized recessions in certain countries that could be affected the most, for example, Poland, Germany and maybe Italy in Europe, but we can see that it’s coming to the USA as well – says Eran Gruse, a professor of economics at the Murray State University in Kentucky.

That everything has slowed down and that it’s not easy to meet the deadlines is also shown by the fact that this year’s global goods trade was projected to grow 4.7%, whereas a new analysis by the World Trade Organization shows that the sanctions would bring it down to only 3%.

Deloitte Advisory d.o.o. Beograd

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German Coal Importers Association

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postponement of closing of thermal power plants

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