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EU Member States Clash on Sanctioning Russian Aluminum

  • European Commission promises to work on a new sanctions package targeting sectors like aluminum, responding to calls from member states like Estonia, Latvia, Lithuania, and Poland.
  • The aluminum industry in Europe advocates for sanctions on moral and economic grounds, citing decreased dependency on Russian imports and the ease of obtaining aluminum from other global sources.
  • Challenges remain, including potential exemptions for certain EU member states, lack of a certification system for aluminum origin, and the need for EU-U.S. cooperation on sanctions targeting Russian aluminum giant RUSAL.
Aluminum

Last week, the EU passed its latest sanctions package on Russia to coincide with the second anniversary of the full-scale invasion of Ukraine.

As I discussed in a previous briefing, the measures introduced were weak, consisting largely of additional asset freezes and visa bans.

The rather feeble package also prompted internal criticism within Brussels, especially from more hawkish EU member states, with the argument that the European Union must be more ambitious in sanctioning the Kremlin in the future.

Speaking to several EU diplomats, who wish to remain anonymous because they don't have the authority to speak on the record, the European Commission has promised to start work on a new sanctions package with immediate effect. And this time it will try to include sectoral sanctions that would have a much greater impact on the Russian economy.

One of those sectors is aluminum. Estonia, Latvia, Lithuania, and Poland have pushed for both import and export bans on the metal for a while now.

Officials from the four nations noted in a discussion paper, seen by RFE/RL, that "Europe's imports of aluminum not only fund Russia's war economy but also benefit Kremlin-backed oligarchs and state companies."

It is estimated that the European Union still imports the metal from Russia to the tune of 2.3 billion euros ($2.5 billion) per year. The bloc also exports various aluminum products to Russia, worth some 190 million euros.

The only sanction the bloc has enacted in this field has been a very specific and targeted import ban on aluminum wire, foil, tubes, and pipes produced in Russia.

That still leaves 85 percent of the aluminum business -- including the lucrative construction and automotive industries -- untouched so far.

Deep Background: This could change as the aluminum industry in Europe is now calling for more sanctions on Russia.

Representatives of Europe's aluminum industry in Brussels have argued that on moral grounds "business as usual" with Russia cannot continue.

But there are also compelling economic reasons.

Before Russia's full-scale invasion of Ukraine in February 2022, imports of Russian aluminum represented well over 30 percent of the EU's total. Now, Russian aluminum represents only around 8 percent of the bloc's imports due to the industry decoupling from Moscow voluntarily. By relying on it less, there is less to lose by sanctioning.

Aluminum is also quite different from other raw materials, such as the much rarer uranium used in the nuclear industry. It is easy to obtain, produced all over the world, and easy to transport.

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Given that the EU is now producing even more aluminum and importing it from new partners in Iceland, Mozambique, and Norway, supply is far outstripping demand.

Drilling Down

  • There are still a number of issues that need to be overcome. While the dependency on Russian aluminum in general has reduced across the EU, a few EU member states -- most notably Greece -- still rely on Moscow for most of its imports of the metal. And as always with sanctions, all 27 EU member states need to sign off on them.
  • Officials from the European Commission have also said there are three areas that Brussels, out of principle, won't target with sanctions: food, drugs and medical equipment, and critical raw materials. Aluminum is classified as a critical raw material by the EU, even if there might be an abundance of it on the market right now.
  • The European Commission is aware of another obstacle. If sweeping sanctions on aluminum were to be introduced, some member states could ask for exemptions. Greece would be an obvious candidate. This is what happened when the EU introduced sanctions on Russian steel imports in 2023. A few EU member states won derogations, allowing them to ignore the measures until 2028, distorting the bloc's internal single market and giving those countries a competitive advantage.
  • In the steel industry, there are certificates of origin, which establish the country where the alloy comes from and where it was manufactured. What concerns the EU is that there is no such thing in the aluminum industry, which makes it easier for Moscow to circumvent sanctions. A system similar to the one for steel could be created for aluminum, but it would probably require a sustained global effort to be effective, and this could prove time-consuming.
  • Future sanctions in this field will also depend on EU-U.S. cooperation and coordination. The United States doesn't have any sanctions on Russian aluminum, but it has slapped a 200 percent tariff on the metal. Washington and the EU could also impose sanctions on RUSAL, the Russian state-owned aluminum giant.
  • The United States has previously targeted the company. In 2018, the White House imposed sanctions on the company's then boss, oligarch Oleg Deripaska, and all his businesses due to "Russia's malign activity." (While the measures were lifted one year later, it does show that sanctions targeting aluminum haven't always been off the table.) With Deripaska on the EU's blacklist since April 2022 due to his economic support of Russia's war in Ukraine, some EU officials believe that there is room to go even further.

By RFE/RL

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Leave a comment
  • Mamdouh Salameh on February 28 2024 said:
    It is becoming blatantly obvious that the more sanctions the EU imposes on Russia, the deeper its economic growth plunges towards zero.

    The EU countries have become like puppets being manipulated by a puppeteer (the United States) to serve its purposes. They have been conned into getting involved in the Ukraine conflict where they have no vital interests and pressured to impose sanctions against Russia and contribute billions of dollars in financial and military aid when these funds could have been better spent on stimulating an anaemic economy and helping their farmers and citizens withstand rising energy prices and costs of agricultural and manufacturing production.

    The irony is that countries imposing sanctions against Russia are suffering badly economically whilst the Russian economy is flourishing.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

Leave a comment




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