Russia's Coal Kept Flowing After the EU Ban. It Now Depends on Four Buyers and a Railway

When the European Union adopted its fifth sanctions package in April 2022, the coal ban was its headline energy measure. The Council described a prohibition on buying, importing or transferring coal and other solid fossil fuels from Russia, effective from August 2022, and put the value of those imports at EUR 8 billion a year. It was the first time the bloc had closed its market to a Russian energy commodity. Eighteen months on, the result is clearer, and it is not quite what the ban's advocates hoped.

China, South Korea, Türkiye and India received more than 80 per cent of Russia's coal exports between August 2022 and July 2023. In the previous twelve months, the same four countries took 47 per cent. China imported 104 million short tons of Russian coal in the year to July 2023, a 73 per cent increase on the preceding year. The EIA notes that this concentration persisted month after month after August 2023, with the four buyers continuing to take more than four-fifths of Russia's coal exports.

A seller with four large customers is in a weaker position than one with a dozen. Each buyer knows the alternatives available to Russian exporters are limited, and that knowledge shows up in price. China and India have large and growing coal-fired fleets, and access to coal from a motivated seller is a straightforward commercial gain. Russia's export model faces a physical constraint as well as a commercial one. Most of its coal is mined in the Kuzbass region of Western Siberia, a very long way from the Pacific ports that serve Asian buyers.

The other side of the reshuffle is visible in the United States. Exports matter more to US producers because the home market is shrinking. In 2019, US power plants burned 539 million short tons of coal and exports were 94 million. Judged against its own aim of cutting off a Russian revenue stream from Europe, the coal ban worked. Judged against a broader aim of reducing Russia's coal earnings, the record is more mixed. The broader lesson of the coal ban is about the limits of unilateral energy sanctions in a liquid global market.