Embargo on Russian Hard Coal Unpleasant in the Short Term, but Bearable
ifo researcher Karen Pittel describes a potential embargo on Russian hard coal as “unpleasant in the short term, but bearable” for the German economy. “This is clear from the key data currently known regarding coal reserves and the potential for replacing Russian imports. The impact is likely to be much less compared to an import freeze on Russian natural gas.” In the case of electricity, hard coal could be replaced by lignite if necessary, which in turn would make quantities available in the short term to meet demand in manufacturing. “Any increase in coal prices due to such an embargo is likely to be short-lived,” Pittel adds.
Imports from Russia accounted for 57 percent of Germany’s hard coal imports last year. “But we expect that this could be offset by imports from other countries, at least over the next few months,” Pittel says. The embargo would probably not lead to a long-term global shortage of coal. Just as Germany could contract with new suppliers, Russia would try to switch to buyers that do not support the sanctions. Freed-up quantities could then be imported by the EU, for example. In this scenario, the impact on coal prices would remain manageable, but so would the repercussions for Russia. In this respect, and because of the relatively low financial importance of coal exports, an embargo appears to pose little threat to Russia.
