Russian coal must be shipped through Latvian ports as fast as possible before August 10, when a ban on "the direct or indirect purchase, import or transfer of coal and other solid fossil fuels originating in or exported from Russia" and "the provision of technical assistance, brokering services or other services related to the goods and technology referred to in paragraph 1 and the provision, manufacture, maintenance and use of those goods and technology" will enter into force in the European Union.
The imminence of the implementation of the prohibition shall ensure a surge of economic activity from which many shall benefit. For the Russian government, it allows for record energy export revenues and a state budget surplus in the first half of 2022. There is no shortage of interest in Western Europe to buy Russian coal in as large a stock as possible, to sell it in the cold of winter for perhaps two or ten times as much. Latvian ports can report a very sharp increase in the tons of cargo handled as a result of the increase in coal.
A year ago, coal cargo volumes in Latvian ports were close to zero, which was a disadvantage for operators because it did not cover investments in berth equipment designed to handle millions of tons of coal. In fact, in the first half of last year, only 215,000 (0.2 million) tons of coal were handled in Latvian ports. The figure for the first half of this year is already 4.44 million tons, almost 21 times more. The increase is even more dramatic, not in the total quantity, but in the quantity of Kazakh coal, which has risen from 34,000 to 2.46 million tons, an increase of 72 times. As can be seen, the total weight of Kazakh coal has already exceeded that of Russian coal, but the resumption of Russian coal supplies is also noteworthy both for its volume and for the fact that Russia needs the services of Latvian ports, despite the investment in the construction of Russian ports on the north-eastern shores of the Baltic Sea.
Of course, the recovery of total coal flows does not guarantee that they will be distributed evenly among all traders who have developed coal transshipment businesses in Latvian ports.
The return of Russian coal to Latvian ports is a paradoxical consequence of Russia's war in Ukraine, which has led to the imposition of new economic sanctions against Russia. They date back to 2014, when Russia successfully attacked Ukraine and was symbolically punished for it. Yes, there were sanctions - even packages of sanctions with ever higher serial numbers - but without any real impact on Russia. The situation changed radically only after February 24 this year, when Russia launched a new and this time much less successful attack on Ukraine. As soon as it became clear that Russia's blitzkrieg plan had failed, the world community became emboldened to punish the aggressor for real. Before February 24, targeting Russia's energy exports seemed an impossibility.
Coal became the first victim among Russia's energy resources. On April 8, LETA reported on the fifth EU sanctions package against Russia, which at first glance resembled the previous ones. LETA presented it under the headline "EU sanctions 217 individuals, including Putin's daughters”. The story of Putin's daughters was then told as long and as broadly as possible, with the disclaimer that "details of the lives of Putin's daughters are a closely guarded secret of the Kremlin", while the energy sector measures included in the same sanctions package were presented in very concise terms: "In addition to sanctions on individuals, the EU has also approved an embargo on coal imports. These are the first sanctions as a result of the war launched by Putin that are targeting Russia's lucrative energy industry, estimated to be worth €4 billion a year, the EU Presidency said. The EU has already started working on additional sanctions, including on oil imports."
The EU's fifth sanctions package coincided with Russia's military failure in its attack on the Ukrainian capital Kyiv. So Russia was punished for a failed war. In a much more noble version, Russia was punished for war crimes, the evidence of which was revealed in the territories temporarily occupied by Russia, of which the suburb of Kyiv, Bucha, has become a symbol.
The fifth package of sanctions was followed by a sixth package, dated June 3. In it, coal was replaced with Russian oil and its products. The April decision to suspend imports of Russian coal was set to take effect in August, while oil imports will be suspended at the beginning of next year.
There is currently a stand-off over Russian natural gas over who will impose gas sanctions on whom. Russia is demonstratively turning on and off its gas taps - interrupting and restarting gas supplies to Western Europe through various pipelines, in any case using the smallest part of their technical capacity. "We need to prepare for the possibility of a complete suspension of Russian natural gas supplies", said EC President Ursula von der Leyen a few days ago, summing up a consultation of EU Member States which resulted in national pledges to reduce natural gas consumption by 15%.
In winter, heat is of interest to citizens and industry alike, regardless of the energy carrier used to deliver it to heat producers. Problems with Russian oil and natural gas supplies have made it all the more important to buy coal from Russia, which is much easier to store than oil and gas. Another thing is the environmental problems attributed to coal, which led the EU, with Germany at the forefront, to refuse coal demonstratively. Now, at least for a while during next winter, the policy has done a 180-degree turn.
The fact that coal is relatively easier and cheaper to transport, transship and store has opened up unexpected opportunities for the Freeport of Riga. This week, an agreement was reached at the level of a letter of intent between the ports of Riga and Gdynia for five million tons of coal to be accepted by Riga instead of Gdynia. Coal will be shipped from all over the world to the coal port on Krievu Island on a huge scale for Latvia, by long-distance ships, which Gdynia cannot handle in the numbers now needed. So coal in Riga would be transferred from large ships to smaller vessels and taken to Gdynia or elsewhere.
An extra five million tons of coal this year should be enough to keep not just Riga but the whole of Latvia on track to keep up the growth in transit cargoes despite the August 10 scare synchronized between the EU and the UK. At the moment, the Latvian authorities are unable to explain how exactly August 9 will differ from August 11 in the transshipment of Russian coal in Latvian ports. Will August 10 come at 00:00 on the night of August 10, or at 24:00 on the night of August 11; local time or perhaps Greenwich time? Will the loading of the ship on the Latvian coast, or the unloading in Germany, Great Britain, etc., have to be completed at that time? Or will August 10 be the last moment to register a transaction with Russian coal, which will still be allowed to be transported on EU territory a year later? Are Latvian ports really banned from handling Russian coal for shipment to India, which has not imposed any sanctions on Russia?
The Ministry of Transport has spent the week trying to wriggle out of the answers, first with excerpts from the EU regulation on sanctions, from which it is impossible to understand exactly how these sanctions are to be implemented, and then by wondering why the Ministry is being asked anything at all, since "all operators dealing with cargoes of a given risk are well informed about how to proceed". I wonder, though, who has informed them if the Ministry of Transport cannot answer a single question.