Russian coal exports hit record highs after EU shipping sanctions were softened

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Russian exports of coal have soared to record levels after the EU softened sanctions on European shipping companies allowing them to carry goods worldwide shortly after a ban was imposed in August as part of the fifth package of sanctions.

The fifth package was imposed in April. It was the first package to target Russia’s energy business, as it banned European companies from seaborne shipments of coal and went into effect on August 10.

The leading EU shipping companies, and particularly Greek shipping, has resisted the ban on shipping Russian goods as it makes up such a large part of its business. Institute of International Finance (IIF) found in a survey that since the war started not only has Greek shipping failed to reduce its work with Russia, but its market share in transporting Russian goods by sea has risen from 35% to 55%, when reflagging and other dodges to obscure the ownership of ships is taken into account.

Lobbying by the Greek shipping industry and others led the EU to soften the fifth package sanctions. The ban on the transport of Russian coal and other products was amended in September and allowed the provision of services like shipping, financing and insurance needed to transfer coal and other products by ship to destinations outside the EU in order to “alleviate the energy and food crises worldwide.”

Since then Russia’s seaborne coal exports have risen to the highest levels on record as the winter arrives with many of the shipments going to Asia. Previously the EU was heavily dependent on the imports of Russian coal, which accounted for 46.7% of all EU imports of solid fuel, according to Eurostat.

The volume of Russian coal exports in October rose to 16.6mn tonnes, just under the level in June, which was the highest volume since 2017, according to analytics firm Kpler. Exports have slipped a bit since then, in line with normal seasonal volatility, Port News reports.

Like Russia’s oil exports, the softening of the shipping sanctions on Russian coal producers has allowed them to successfully redirect their business to Asia and represents more sanctions leakage.

Russia is one of the world’s top three coal exporters, though the business makes up only a small part of the whole Russian energy complex.

Turkey is again playing an important role as a transit country for Russian exports. Turkey has also refused to participate in the oil price cap scheme that came into effect on December 5 and is giving passage to Russian ships passing through the Bosphorus straits. China is one of the main customers of Russian coal, on which it remains heavily reliant for fuel to fire its power stations.

Kpler calculated the increase based on shipments of coking and thermal coal from ports, as well as broker reports and its analytics network. The estimates don’t include Russia’s coal exports by rail, which are also significant.

The European ban on the import of Russian coal remains in place, forcing European power companies to import coal from as far away as Australia, another major coal producer. But European shipping companies have been allowed to ship coal to third countries since September. Sales of coal have soared during the energy crisis as countries seek cheaper alternative fuels to the volatile and increasingly expensive gas and LNG.

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