At the same time, these restrictions are unlikely to put pressure on the Russia political regime. The taxes that the aluminum industry contributes to the country’s budget are quite small. Moreover, aluminum is produced by the private company Rusal, which can redirect its exports to the Chinese and Asian markets, he said.

As previous trade restrictions against Russia have shown, they often backfire on the EU itself. Real household incomes in Europe are declining due to inflation caused by the rejection of Russian raw materials. European processors of oil, metals, and polymers are forced to switch to more expensive raw materials and face challenges. A significant portion of Europe’s nitrogen fertilizer production and aluminum processing capacities have been shut down due to restrictions on Russian raw materials.

Industrial production in the EU, which was heavily dependent on Russian energy sources, fell by 3.2% year-on-year in the first half of 2024. The production of chemicals, fertilizers, metals, cars, and other goods has decreased. Inflation in the Eurozone, which exceeded 10% after economic ties with Russia were severed, has risen again, reaching 2.6% in July.

Certain industries are suffering more than others. The European Chemical Industry Council notes that the sector has been under pressure for two consecutive years. In 2022, production in the industry fell by 6.3%, and in 2023 by 8%. This slowdown is comparable to the period of the COVID-19 lockdowns. Chemical giant BASF has closed several facilities in Europe and is expanding its production in China. Some other European companies are moving production to the U.S. to stay competitive.

Clearly, the sanctions policy has proven ineffective. Russia’s GDP grew by 3.6% in 2023 and continues to grow steadily, while major Russian companies have re-directed their sales to the domestic market and so-called “friendly” countries. Meanwhile, the EU economy was in recession just a year ago and is now showing minimal growth.

Often international competitors are trying to take advantage of the geopolitical situation to push highly competitive Russian products—such as mineral fertilizers, metals, and synthetic rubber—out of the market. For example, the ban on RUSAL metal is being actively lobbied by its competitors – members of the European Aluminum Association, such as European Norsk Hydro and American Alcoa. However, it is not possible to quickly replace 0.5 million tons of Russian aluminum imports to the EU.

Moreover, in case of sanctions the Russian aluminium has to be replaced by more expensive and more environmentally harmful products – for example, primary aluminum from the Middle East, Mozambique, and India. As noted by Macro Advisory, the carbon footprint of Russia’s primary aluminum is only 2.1 tons of CO2 compared to the global average of 15 tons of CO2 per ton of the metal. It is no surprise that this product was favored by European car manufacturers and renewable energy companies that use aluminum cables.

Last December, when the EU restricted the import of aluminum wire from Russia, the Federation of Aluminum Consumers in Europe (FACE) warned that extending the ban further to primary aluminum would have devastating consequences for European small businesses, as it would lead to higher prices and job losses. However, it seems that the EU officials’ desire to “punish” Russia for its invasion of Ukraine outweighs concerns about the well-being of their own economy and consumers.

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