EU Commission proposes embargo: Russian oil and coal are interchangeable

Created: 04/07/2022, 09:24

By: Matthew Schneider

The Ukraine war presents Germany with fundamental decisions in relation to energy policy.

© Bernd Thissen/dpa

The EU Commission has proposed an embargo on coal from Russia, calls for an oil freeze are getting louder.

That would be easier for Europe than with gas - but not hopeless for Russia.

BRUSSELS - Following reports of war crimes in Ukraine, pressure is mounting on Europe to become independent of Russian energy supplies.

While western dependency on natural gas seems too great, other energy suppliers such as hard coal are easier to replace, as Carsten Fritsch, raw materials expert at Commerzbank, explains: "The Association of German Coal Importers assumes that Russian deliveries through countries such as Colombia, the USA, South Africa, Mozambique, Australia and Indonesia could be replaced.

Within the EU, Poland could perhaps expand its production significantly.”

Coal and oil embargo for Russia?

Expert confirms - EU could compensate for failure

Because of the limited capacities, however, higher prices would probably have to be paid: "After the announcement of the EU coal embargo, the tonne prices for hard coal in Rotterdam, for example, rose from 260 dollars to almost 300 dollars.

For comparison, they were around $150 at the beginning of 2022.” However, these are not unusual highs: “In early March, when oil was near an all-time high because of the Ukraine war*, coal was at $485 a ton. "

Fritsch expects the price of coal to remain at a relatively high level compared to the beginning of the year.

When it comes to oil, it is more difficult to replace Russian supplies: "The International Energy Agency (IEA) assumes that Russian oil production is falling by three million barrels a day because of the West's voluntary reluctance to buy." Some companies had announced , not wanting to buy any more Russian crude oil, even though there are no such sanctions.

According to Fritsch, Europe could compensate for this loss: The USA* and other IEA countries want to release a total of around 240 million barrels of oil from their reserves.

Ukraine war: Russian oil would not disappear completely - supply relationships before upheaval

For Europe, it's all about the prices: "All in all, Russia* up until now has probably been exporting around four million barrels to Europe every day.

If they were completely eliminated, they would have to be replaced elsewhere on the world market, which would of course drive up prices, possibly to the recently seen $140 per barrel,” says Fritsch.

However, this situation should not last long: "Although the members of the oil cartel Opec+, which includes Saudi Arabia, the United Arab Emirates and Russia, do not want to significantly increase their production volumes, it is questionable how long the first two named will continue this blockade attitude maintain", because "the longer they do this, the more likely it is that

Also: “One must not forget that Russian oil is not completely disappearing from the world market: countries like India and China are not participating in the sanctions and are currently buying Russian oil with a discount of up to $30 per barrel.

It can therefore be assumed that the supply relationships will shift in the long term.”