Page 38 - Russia OUTLOOK 2023

scheme, but at the time of writing it remains to be seen how effective that will
be.

The failure of the efforts to sanction Russia’s coal exports is indicative of the
increasing difficulties the West has on imposing sanctions on Russia. Russian
exports of coal soared in the last months of 2022 to fresh highs after the EU
softened sanctions on European shipping companies, allowing them to carry
goods worldwide shortly after a ban was imposed in August as part of the fifth
package of sanctions.

The fifth package was imposed in April. It was the first package to target
Russia’s energy business, as it banned European companies from seaborne
shipments of coal and went into effect on August 10.

The leading EU shipping companies, particularly Greek firms, have resisted
the ban on shipping Russian goods as it makes up such a large part of their
business. The Institute of International Finance (IIF) found in a survey that
since the war started not only has Greek shipping failed to reduce its
involvement with Russia, but its market share in transporting Russian goods by
sea has risen from 35% to 55%, when reflagging and other dodges to obscure
the ownership of ships are taken into account.

Lobbying by the Greek shipping industry and others led the EU to soften the
fifth package of sanctions. The ban on the transport of Russian coal and other
products was amended in September and allowed for the provision of services
like shipping, financing and insurance needed to transfer coal and other
products by ship to destinations outside the EU in order to “alleviate the energy
and food crises worldwide.” Since then, Russia’s seaborne coal exports have
risen to their highest levels on record as the winter arrives, with many of the
shipments going to Asia. Previously the EU was heavily dependent on imports
of Russian coal, which accounted for 46.7% of all EU imports of solid fuel,
according to Eurostat.

The volume of Russian coal exports in October rose to 16.6mn tonnes, just
under the level in June, which was the highest volume since 2017, according
to analytics firm Kpler. Exports have slipped a bit since then, in line with normal
seasonal volatility, Port News reports.

Like Russia’s oil exports, the softening of the shipping sanctions on Russian
coal producers has allowed them to successfully redirect their business to Asia
and represents more sanctions leakage.

• Trade

The trade turnover with the EU increased dramatically in 2022 despite the
sanctions regime. However, the increase in dollar and euro terms was largely
driven by soaring energy and commodity prices as the volume of goods traded
fell heavily in the period. What the chart below shows is the pain inflicted on
Europe by the war in Ukraine and the price shock induced by the war. Those

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