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EU considers a ban on Russian coal imports. Will that help to deescalate the war?

A MARTINEZ, HOST:

The European Union is considering banning Russian coal imports. Europe heavily relies on Russian energy sources, but after the atrocities reported in the Ukrainian town of Bucha, the president of the European Union called for new economic penalties to further pressure Vladimir Putin. Will that pressure, though, be enough?

Let's put that question to Henning Gloystein. He's the director of energy, climate and resources at the Eurasia Group and joins us now from the U.K. Henning, let's start off with this. If the EU does indeed ban Russian coal imports, how much does that hurt Vladimir Putin?

HENNING GLOYSTEIN: So that does actually hurt Russia quite a lot. Russia is a major exporter of coal, and Europe is one of the biggest buyers of Russian coal. So it would hurt Putin where it matters, in his treasury. And from the European side, it's doable. Coal is largely used for making power and for making steel. And there are alternative supplies, including Colombia and South America and the U.S., Canada, South Africa. So this is doable. It wouldn't cause supply disruptions at this stage. It would just cause higher prices, which the EU sees as a cost that it is prepared to take at this stage.

MARTINEZ: But if Russia - if the EU, or Europe, does go to other sources, I mean, that's a lot, isn't it, to pay for the shipping to go from, say, Indonesia to Australia or maybe even the U.S.?

GLOYSTEIN: Yeah, yeah. I mean, the cost of coal - I mean, European coal costs have already gone through the roof. They've increased - they haven't been this high since - I don't know, since 10, 15 years. So that is the cost of decoupling from Russia. But that is considered doable. You can also, actually, in Europe, sell this - at least try and sell this as a green move, to say, like, you know, we're going to try and cut off from Russian coal and not replace it with other coal, use alternative cleaner fuels. So this is actually fairly a popular choice, and it is seen as feasible because there are many alternatives, unlike in natural gas, where Europe is connected to the Russian pipelines. And of course, gas is used for much more than just power. It's used for making fertilizer and making and producing heat in winter. So that's seen as a much more drastic step, which Europe at this stage isn't willing to do yet.

MARTINEZ: Yeah, and that's what I was going to ask you about, because I was wondering, why start with coal, when maybe they could go in other directions? But it's a matter of reliance, right? I mean, they can - you said it's doable to get off of coal right now but maybe not gas.

GLOYSTEIN: Yeah, exactly. So there's two things about this escalation. So the EU, on one side, wants to be able to keep escalating their sanctions. So if they went in all-in now and sanctioned absolutely everything, including oil and natural gas, and then the situation in Ukraine worsens still, then what do they do, beyond going to war, which they have made very clear they don't want to do? Whereas if they do coal now and the situation gets worse in Ukraine, still they can go to oil, which is also seen as barely doable but still doable without huge energy sanctioning at home, whereas natural gas - if Europe does that, it will cause a, you know, rationing of energy at home, of households, of industry. It'd cause a recession. And then, you know, beyond that, Europe can't do very much.

And then there's a bit of a fear that if you go all-out from Europe to sanction everything in Russia, that that won't actually de-escalate, that it would escalate instead, because then Putin knows that he doesn't have much time for his war left because he's going to run out of cash within the next year or two, so that one of the only options he might see available to him would be to actually escalate further and lash out, trying to win a really brutal victory really fast. And then again, the EU's back to stage one and see what - you know, what do you do? So that is the reason why they're wanting to start with coal first and then try to escalate further if they have to.

MARTINEZ: So you said it definitely would hurt Vladimir Putin to eliminate Russian coal, and you said it's doable for Europe, but it doesn't sound like it would be something that could get him to de-escalate his war in Ukraine.

GLOYSTEIN: Yeah, this is one of the problems, of course. These are measures that, yeah, for sure, they hurt, but we've seen with other sanction measures in the past in other countries that they don't really tend to have the desired effect, at least not in the short term. It's still seen as important, though, because it does deprive Russia from important money that they could otherwise use. And at this stage, it - you know, it causes pain in Europe, but it is doable. But you're right to point out, it's, like, you know, if it's not going to help to de-escalate the situation in Ukraine, why not do something stronger now or why not try and do something totally different? So there are some critics about the steps. Absolutely.

MARTINEZ: Yeah. That - it sounds like it would be natural gas and oil. That sounds like that could be the hammer that could really hurt Russia.

GLOYSTEIN: Yeah, absolutely. So the next step, if the situation gets worse in Ukraine, would be oil. That is still seen as somehow doable - really difficult, but doable because there are alternative oil supplies. This is also why you're seeing a renewed attempt to end the sanctions, U.S. sanctions, on Iran, because that Iranian oil would be really convenient to replace Russian oil, maybe Venezuela as well. U.S. shale drillers could come in. So there are other alt suppliers around there, but that would cause huge economic damage already. But the big gun in Europe would be gas. And that is sort of the last step that the European Union - sort of the last bullet they want to have in their sanction gun to be able to fire at Russia if things get really seriously worse from here, which is very possible, sadly. And that's the sad situation we're in and a little bit scary, as well, A.

MARTINEZ: Yeah. And Lithuania just said it will no longer use Russian natural gas. I'm wondering, though, Henning, how much of this do you think maybe hinges on the calendar? It's getting warmer in Europe, so maybe you can squeeze Russia on energy through the summer. But when the winter comes back, is that going to be enough time for Europe to find other options where they won't ever need to rely on Russia?

GLOYSTEIN: That is exactly the point. So it's - we've just ended winter here, so heating demand is down. And in fact, Europe's reliance on Russian gas is really skewed towards the winter, towards needing that natural gas for heating, and the reliance during summer is much lower, so you can replenish your inventories. And then by September, October this year, you can hope that there's going to be a mild winter. But if all the Russian gas stops, make no mistake, there will be energy rationing of households, of industry. There will be a recession. And that would last right through to next year into 2023. Long term, you can replace everything. But this year or next, you can't fully replace all of Russian gas. Then that would cause huge damage in Europe as much as it would, of course, damage Russia as well. But we might get there if things don't get better.

MARTINEZ: Henning Gloystein with the Eurasia Group. Henning, thanks.

GLOYSTEIN: Thank you. Transcript provided by NPR, Copyright NPR.