The ban on Russian coal may have negative effects on the German economy, but it is potentially less harmful than cutting off gas. Globally, coal shortages are not expected – the impact on Russia also depends more on the needs of countries that have not joined the embargo. Conclusions from the German Ifo Institute.
The 27 member states of the European Union decided, on Thursday, to impose a ban on Russian coal and close European ports, as part of the fifth round of sanctions against Moscow. “This ban may be troublesome in the short term, but it is manageable,” concludes IFO economist Karen Bettel.
According to the analyst, this is evident from current data on coal reserves and the ability to replace Russian imports with other suppliers. Russia accounted for 57% of Germany’s coal imports last year. “But we hope that this will be offset by imports from other countries, at least in the coming months,” the economist says.
At the same time, the impact of the coal ban is “much less” than the effect of freezing Russian natural gas imports. In the case of electricity, coal can be replaced with lignite if needed, which in turn is available in short-term quantities to meet industry needs, he suggests.
Therefore, “any increase in coal prices due to the European embargo is likely to be short-term,” says Karen Bettel.
On the other hand, the EU ban should not lead to a long-term global shortage of coal, says Ifo. “Just as Germany can enter into contracts with new suppliers, Russia will try to deal with other countries that do not support sanctions,” he says.
In this scenario, the economist says, “the impact on coal prices remains manageable, as well as the ramifications for Russia.”