After banning Russian coal, Europe reopens its mines to face high prices

The European Union's ban on imports of Russian coal has prompted European countries to revive some coal mines that have been closed for years to make up for the shortfall.

The EU aims to punish Russia for its war on Ukraine. This will result in the Russian government losing about 8 billion euros annually, according to statements by the European Commission.

On the other hand, analysts believe that this decision will harm all global efforts to go to clean energy sources. It will also exacerbate Europe's crisis in the availability of various sources of energy, especially with the shortage of natural gas supplies and the rise in international prices.

The EU ban on importing coal from Russia came into effect on August 11, after the bloc's countries agreed in April on a 120-day transitional period to give the sector an opportunity to adapt to the import ban.

In July, the UK Department of Commerce announced a ban on imports of Russian coal from August 10.

Russia has 15% of the world's coal reserves, according to BP's annual energy report. Russian coal supplies 45% of EU imports, with some countries especially dependent on it, such as Germany and Poland, which use it to produce electricity.

In the process of implementing the Russian coal ban, European countries imported 7.9 million metric tons of thermal coal in June. That's more than doubled year-over-year, data from BraemarShipping Services show.

However, International Energy Agency data indicates that coal is still the world's largest source of electricity generation. It provides about 38% of the global need for electricity, outperforming natural gas and renewable energy.

Russia exported 238 million tons of coal in 2021, with 90 million tons of that going to OECD countries, according to the US Energy Information Administration.

Electricity price increase

The Russian news agency TASS quoted the director of the National Energy Efficiency Center, Ekaterina Kvasha, as saying that the ban imposed by the European Union and the United Kingdom on imports of Russian coal may lead to an increase in electricity prices in Europe.

Kvasha explained that coal accounts for about 15% of Europe's electricity generation, and Russia accounts for half of all imported thermal coal.

Europe will turn to Australia or Indonesia to make up for the absence of Russian coal imports. But the price will be higher due to the logistics and the general increase in the price of coal in the market, according to the Russian official.

However, the German Coal Importers Association does not expect supply bottlenecks in Europe despite the ban, as coal is available on the global market. The leading suppliers in the future will be the United States, South Africa, Australia, Indonesia, and Colombia.

Regarding the fate of Russian coal, Kvasha indicated that those quantities suspended as a result of the embargo can be redirected to the markets of Southeast Asia, China, and India.

Pressure and expected increases

Regarding the impact of the decision on the European interior, CorradoMacchiarelli, Research Manager for Global Macroeconomics at the National Institute of Economic and Social Research (NIESR), said to Jusoor Post that Russia accounts for 47% of solid fuel imports, primarily coal, while the United States accounts for 18%, and 14% for Australia.

Macchiarelli pointed out that four European countries depend more than others on Russian coal imports, led by Germany, Poland, the Netherlands, and Italy. The EU buys its imports of Russian coal at about 4 billion euros annually.

The economist expressed his fear of rising energy bills for European citizens in the absence of preventive measures, causing increased pressure on citizens' incomes. In addition, the growing demand from the countries of the EU will contribute significantly to the increase in coal prices in the world markets.

In Germany, the government introduced new energy-saving measures, including banning private swimming pools from being heated in the winter and making unused spaces in large office buildings unheated, in addition to turning off the lights at tourist attractions.

The city of Cologne has reduced street lighting after 11 pm. Hanover turned off the lights on historic buildings and public fountains. Berlin decided to reopen closed coal plants instead of closing the remaining plants by the end of the decade as previously planned.

Leslie Palti-Guzman, co-founder and CEO of Gas Vista and Leviaton, was quoted by Foreign Policy as saying that returning to coal is “inevitable” and will remain “instrumental” to securing energy security.

Punishment for Europe

The CEO of the Corum Center for Strategic Studies in London, Tariq Al-Rifai, explained to Jusoor Post that “the problem of banning Russian coal is the same as the problem of banning gas imports, as the European Union, especially countries such as Germany and Italy, depend mainly on Russian coal.”

“If this policy continues, where will the alternative coal come from with the rise in prices? This is a question mark, given that China is the world's largest consumer of coal with about 60% of global production, then India, then European countries, and Russia is one of the largest producers of coal around the world,” he said.

Al-Rifai considered that “all these policies come to try to punish Russia. But they will not succeed, because the reaction will have a direct impact on the European economy more than on the Russian one. The European citizen will bear this bill.”

Amer Mohamed, a researcher specializing in oil affairs at the British University in Egypt, agreed with Al-Rifai, saying, “The ban on Russian coal will indirectly affect the prices of other energy sectors, especially gas, which will occupy a narrow place in the sources of electric power generation.”

Speaking to Jusoor Post, Mohamed added,“This will also put pressure on the electricity bill, whose prices are still high, exceeding the barrier of 200 euros per megawatt hour. And it will reduce the ability of the European continent to store or raise its gas stocks, as Europe hopes to raise its stocks to 90% before November in preparation for the winter season.”

“Europe can compensate imports of Russian coal from the consignments that come from the African continent, Australia, and the United States,” he continued.

“This will certainly be at the expense of the price as coal prices have risen as a result of the European ban and some other factors such as problems related to the coal trade between China and Australia,” the researcher in oil affairs pointed out.