The European Union extended the grace period for the import of Russian semi-finished steel products – slabs and square billets, despite the adoption of the 12th sanction package. The German magazine Der Spiegel reports that without Russian steel business models of many European manufacturers will be irrelevant, that is why businesses do not want to refuse from the supplies of Russian steel products. They “have put pressure” on their governments and forced the extension of the grace period which was to end next autumn.
There were several stages in the introduction of the restrictions against Russia’s metal industry. Some constraints were imposed in 2022–2023 within the first few sanction packages and within packages 8 and 11. Europe suspended purchasing of most Russian ferrous metals, but the eighth package provided for the deferral of the sanctions for the import of 7.5 m tons of Russian slabs and around 570 thousand tons of billets from October 2022 until the end of September 2024.
As a result of the sanctions, European industrialists had to buy slabs from Asian countries, Brazil, and other alternative sources. But this is still not enough that is why the demand for Russian products is still high.
According to Eurofer, the share of Russian slabs in European imports has increased to around 56% in recent months, which exceeded the level of the pre-sanction period. The Association forecasts that Russia will earn up to EUR 2 bn annually from this export until 2026. The growth of Russian cast iron imports has also been reported this year. The supplies increased by more than 25% as of the first half of this year.
Earlier, the Western press published information leaks saying that the EU countries intend to negotiate a four-year extension (until October 2028) of the grace period for certain types of Russian steel before a complete import ban.
The Head of the European Steel Association Axel Eggert believes that under the influence of several member states and steel importers, the EU “is taking its own sanctions system to the point of absurdity”. The magazine’s experts state that during the consultations on the new sanction package, the representatives of Belgium, Italy and the Czech Republic insisted on the extension of the grace period while Germany was opposing it.
In case the restriction measures were introduced, four thousand workers would face the risk of dismissal in Belgium, that is why “a transition period is needed to prevent a social catastrophe”. Italian steel mills remain key European consumers of Russia’s cast iron. In the first half of the year, Russia exported 3.81 m tons of cast iron to Italy (50.7% of the export volume).
Experts believe Russia is once again proving it is a reliable partner even in the context of the unprecedented sanction pressure. While, at the same time, the West is once again demonstrating its tortuous approach regarding restrictions.
“Russia must earn money for its economy, budget and its military costs. Our country wants to keep up its reputation vis-à-vis the states of the Global South and East: we are “keeping up our profile”.
Unlike the West, Moscow is showing it is living up to its commitments, it is worth investing into and making long-term contracts with Russia.
“These are the efforts for the decades ahead”, explains Stanislav Mitrakhovich, Lead Expert, National Energy Security Fund (NESF), Research Fellow, Financial University under the Government of Russia. The expert recalled that besides steel and other metals, the West still depends on Russian supplies of enriched uranium, some fertilizers, oil, gas and other products. If the EU still decides to abandon Russian steel completely, this will take several years.
“Our raw materials are still in demand in Europe due to a set of consumer properties, fine tuned production facilities and industry logistic chains. Refusing from it completely will be quite stressful, with the need to rethink all schemes, wait for the construction of new production facilities. The European economy is already not in its best shape in the context of the West’s economic war against Russia”, the specialist added saying it is not unlikely that, in case of the conflict escalation in Ukraine, Europe will have to step up prohibitions under the impact of ideology.
“If Europe works really hard, it can, of course, switch to Indian steel. Yet, it won’t be easy to deliver it while businesses need stable models. Russia is now focusing on winning the special military operation. And, I am sure, we will be there. At the same time, the West wants to keep its industry alive after the special operation. And I have some doubts if they can do it”, adds Dmitry Zhuravlev, General Director, Institute of Regional Problems (IRP). According to him, in the West there is also demand for Russian titanium, “without which there will be no American aviation industry”. “They struggled hard to refuse our diamonds. But with steel they have really blundered. The West banned everything, which could be restricted without significant losses, and now they have to resort to painful methods”, the expert notes with confidence.
“In Russia, there were internal calls to stop trading with the West, to cut oil and gas supplies. But President Putin’s position remained unchanged: we are not the ones terminating contracts, they are doing it, we are not turning trade into a weapon. In particular, the Head of State said so about gas exports”, added Stanislav Mitrakhovich. However, such an approach of Europe to the trade relations with Russia is entirely tortuous, states the expert.
Zhuravlev underlines that before the special military operation “we trusted that our Western partners were our partners indeed, respecting our interests, but now we know it is not so”.