Lobbying against Russian aluminium serves interests of multinational producers, hurts wider EU economy & consumers

With the European Union scrambling to put together its next sanctions package against Russia to mark the second anniversary of the attack on Ukraine in February 2022, it appears that aluminium ban is once again considered by some European politicians.

No decision has yet been made but it is worrying that this move that is likely to hurt the EU’s economy a lot more than Russia’s keeps resurfacing, prompting questions who’s lobbying for its introduction and why.

Politico reported on January 23rd, citing an EU source, that Russian aluminium products may be included in the 13^th package of anti-Russian sanctions currently in discussion in Brussels.

An unnamed European diplomat told the publication that representatives of the EU member states are about to start discussing “additional elements which will eventually become a proposal for a full ban” of Russian aluminium.

Will all the “big items’’ either already sanctioned or not feasible, like nuclear energy or LNG on which the EU remains heavily dependent, an aluminium embargo is apparently seen as a proxy for once again hitting Russia’s energy sector (as energy accounts for 40% of the aluminium smelting expenses).

Brussels-based European Aluminium, a trade group set up in 1981 and representing over 600 plants in 30 European countries, appears to be one of the driving forces behind the idea of a complete ban on Russia-made aluminium.

Importantly, despite the “European” in its name, the group’s members include large multinational conglomerates like British-Australian Rio Tinto or US’s Alcoa.

According to a December 8th Reuters article, in a letter addressed to the European Commission President Ursula von der Leyen, European Aluminium urged EU policymakers to widen the scope of their sanctions against Russia’s metal industry.

One wonders how such lobbying matches European Aluminium’s official goal the association states on its website to “promote the outstanding properties of aluminium, secure growth, and optimise our metal’s contribution to meeting the EU’s sustainability and industrial leadership ambitions”.

Especially given that Russia is a major supplier of “green” aluminium to the EU with much lower carbon footprint than many competitors.

“The scope of the sanctions must be much broader to have a substantial impact. It should include primary aluminium from Russia,” Reuters quoted Pål Kildemo, chief financial officer at Norwegian aluminium producer Hydro as saying. “We need strict anti-circumvention rules to ensure that sanctions are not circumvented by shipping Russian aluminium to third countries and making it into a product that’s sold to Europe.”

Such suggestions from aluminium producers are strongly opposed by groupings representing consumers.

For example, in a joint letter published on the London Stock Exchange in July, a group of European business association, such as the Federation of Aluminium Consumers in Europe, called a possible ban of Russian primary aluminium an “oligopolistic attempt to turn Europe into a captive market” that goes against the EU’s industrial policies.

Commenting on the news that an aluminium ban is being considered for the next package of EU sanctions, Harbor Aluminium said in a report it does not see it as its “base” scenario and noted that such a decision, were it to be made, “would likely be disruptive for Europe’s aluminium supply chain”, “downgrade Europe’s carbon footprint” and “erode European downstream competitiveness.”

Russian aluminium products are low-carbon and replacing them with aluminium from non-green origins in Asia and other markets would hit Europe’s aluminium carbon footprint at the time when EU’s own primary aluminium production is in decline and conflict in the Red Sea region is disrupting traditional delivery routes, Harbor Aluminium noted.

In addition, recent history strongly suggests that a ban of aluminium could have a devastating effect on global prices. Aluminium prices surged 40% on the London Stock Exchange back in 2018 after the US’s Office of Foreign Assets Control imposed a ban on doing any business with the owner of RusAl, Russia’s biggest aluminium producer.

Following the unforeseen market turmoil, the U.S. was forced to first delay and then completely overturn the sanctions.

Were the EU to succumb to the pressure of lobbyists and political pundits and introduce an outright embargo on Russian aluminium, that move would be likely to lead to price volatility, hit European consumers and importers alike, and undermine EU’s own green agenda.

Image: Ingots of aluminum from Baz Sual in Russia.

https://www.flickr.com/photos/docsearls/122574991/ via Wikipedia