Russian coal exports – is Europe still heavily dependent on Russian energy imports?

Following the Russian invasion of Ukraine, the EU applied extensive packages of sanctions against the Russian economy. However, at first one key sector was not targeted by these sanctions: energy commodities. Indeed, a straight ban on Russian commodities would increase pressure on energy prices and fuel the rising inflation rates.

As for coal, Russia is the third world exporter, and accounts for about 45% of European imports. Interestingly, QuantCube real-time data spotted a significant drop in Russian coal exports to Europe since the end of February.

As shown in Exhibit 1, Russia has two main coal-handling port areas: Western (Ust-Luga and Murmansk) and Eastern (Vanino and Vostochny). Historically the western ports are used for coal exports to Northern and Western Europe, while the eastern ports served Asia Pacific (I.e., China) and the countries in Indian Oceans.

Although sanctions against Russia for its energy and commodities sectors didn’t come until recently, we observe that the volume of coal exports from the western ports (Ust-Luga and Murmansk) almost halved in the last two months.

Exhibit 2 indicates that European countries started to decrease their exposure to Russian coals gradually before the Russia’s Ukraine invasion. Once the war broke out at the end of February, the exports started to drop further, most likely anticipating the forthcoming sanctions on Russian coals. The most recent sanction announced by the European Commission (April 6) to forbid the imports of specific Russian commodities including coal by August 2022 further accelerated the export reduction from these western ports.

On the other hand, QuantCube observes a slight increase in Russian exports from the ports of Venino and Volstochny. These ports are used for coal trade to eastern countries including China and India, therefore, the increase in export volume suggests that Russia’s coal trade with China and India remains stable.

In our view, this development is the first evidence that Europe and western countries are trying to find a way to reduce their heavy reliance on Russia and its energy & commodities products. QuantCube will continue to monitor the situation using real-time alternative data.