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. Russia has not lost its coal export volume. It has lost its customer diversity. According to US Energy Information Administration analysis of Global Trade Tracker data, Russia's total coal exports stayed roughly flat at nearly 233 million short tons in the year to July 2023. What changed was where they went.
From many markets to four
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. European imports of Russian coal fell by 57 per cent between the two periods, and flows into the rest of Eurasia, including Ukraine, stopped almost entirely.
The country detail shows how fast the substitution happened. China imported 104 million short tons of Russian coal in the year to July 2023, a 73 per cent increase on the preceding year. South Korea took 34 million short tons, up 44 per cent. Germany and Japan, previously the third and fourth largest buyers, both banned Russian coal in 2022. Türkiye stepped into the gap, more than doubling its imports to 30 million short tons, a rise of 120 per cent, while India's purchases rose 159 per cent to 29 million short tons.
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.
Why concentration matters
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. Russia keeps its volumes, but it is likely to capture less value per tonne, and it is more exposed if any one of those buyers changes policy, faces domestic pressure or simply finds cheaper supply elsewhere.
For the buyers, the logic is the reverse. China and India have large and growing coal-fired fleets, and access to coal from a motivated seller is a straightforward commercial gain. Türkiye, outside the EU and with significant coal-fired generation, has similar incentives. South Korea is the more interesting case, a close US ally that has nonetheless increased purchases sharply, because Seoul has not adopted a coal ban of the kind imposed by Brussels and Tokyo.
The geography problem
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 EIA points to limited eastbound rail capacity, which causes congestion, delays and long turnaround times. Vostochny, Russia's largest coal transshipment port, sits on the Pacific coast and is well placed for North Asia and China, but the surge in eastbound volumes has created bottlenecks on both the railways and at the ports.
That is why India has looked to northern shipping routes for Russian coal, and why total seaborne coal shipments grew by nearly 18 per cent year on year in the first part of 2023, according to the EIA. Coal that used to cross a short sea to Rotterdam or by rail into Central Europe now travels much further, and the cost of that distance falls somewhere along the chain.
Rail capacity is not quickly built. Russia has ambitious plans to expand its eastern rail network, but these are multi-year projects, and sanctions complicate access to finance and some equipment. In the meantime, the network is a ceiling on how much more coal can be redirected east, regardless of Asian demand.
The American angle
The other side of the reshuffle is visible in the United States. Europe still needed thermal coal in 2022 and 2023, particularly while gas prices were high, and US exporters filled part of the gap. The EIA says demand for US coal rose following the embargoes of Russia's coal, primarily for thermal coal in Europe and Asia, and estimates that US exports increased to 100 million short tons in 2023.
Exports matter more to US producers because the home market is shrinking. The EIA expects US coal consumption to fall to 482 million short tons in 2024, 29 per cent less than in 2019, and to 457 million short tons in 2025. Consumption by the power sector, the main customer, is forecast to drop to 352 million short tons in 2024 and 322 million in 2025. As a result, exports are expected to make up 19 per cent of total demand for US coal in 2024 and 21 per cent in 2025.
In 2019, US power plants burned 539 million short tons of coal and exports were 94 million. The relationship between domestic and export markets has shifted materially in five years, and the European sanctions on Russia are part of the reason.
What sanctions on coal did and did not do
Judged against its own aim of cutting off a Russian revenue stream from Europe, the coal ban worked. European imports collapsed, and the switch to other suppliers happened without the kind of physical shortage some feared in 2022. Coal is a fungible, widely traded commodity with many suppliers, which made substitution easier than it was for pipeline gas.
Judged against a broader aim of reducing Russia's coal earnings, the record is more mixed. Volumes have held up, though at the cost of longer routes, higher logistics costs and a narrower customer base. Without price data that the EIA analysis does not provide, it is impossible to say precisely how much revenue Russia has lost. It is reasonable to infer that discounts to Asian buyers and higher transport costs have reduced netbacks, but the volume story alone suggests that a ban by one group of importers mainly reroutes trade rather than eliminating it.
What to watch in 2024
Three indicators will show whether the new pattern is stable. The first is Chinese import demand, which depends on domestic coal output and hydropower conditions as much as on prices. The second is eastbound rail throughput, which sets a physical cap on Russia's Asian strategy. The third is India's appetite, which has grown quickly from a low base and could grow further if delivered prices stay competitive with Indonesian, Australian and South African coal.
The broader lesson of the coal ban is about the limits of unilateral energy sanctions in a liquid global market. They can change who buys and how far the cargo travels. They do not, on their own, take the product out of the world market.