In the Czech Republic 10% of GDP comes from the automotive sector and almost all of its steel comes from Russia. Now EU politicians are looking to end steel imports as pressure builds to increase sanctions on Putin following the invasion of Ukraine
The Czech Republic is asking for a longer exemption period for imports from Russian steel company Novolipetsk Steel (NLMK) during Friday’s meeting of EU ambassadors to discuss the next round of sanctions against Moscow, three EU have diplomats told POLITICO.
Russian steel has been exmpt from sanctions until 2024 and now the Czechs are looking to push that back another four years 2028. It is not alone in seeking to soften the sanctions but the potential damage to the Czech economy is one of the highest in Europe.
They were speaking to the news website following discussions on Friday set to lead to increased sanctions on Russia before the end of the year. The automotive sector is hugely imortant to the Czech Republic’s economy, accounting for about 10 percent of national GDP. Manufacturers, including Volkswagen Group’s Škoda and Hyundai Motor’s Czech subsidiary, have invested heavily in the former Eastern Bloc natiion.
Steel supplier NLMK, one of the four largest steel companies in Russia, produces nearly all of its flat and long steel products in Russia, but around a quarter of its rolling operations are sited in Europe, closer to its industry customers.
Since Russia’s full-scale invasion of Ukraine, Brussels has imposed 11 sanctions packages against Moscow but various EU countries have sought transition periods to win time to find alternatives to Russian imports elsewhere.
The Czechs, together with other countries, including Italy and Belgium, had already gotten a transition period until the end of 2024 to continue using steel from NLMK, especially as rising energy prices were making it harder at the time for European companies to find alternatives to cheap Russian semi-finished steel products.
The Czech Republic is now asking to prolong that transition period to 2028, arguing that “there are major difficulties in getting the product from new suppliers/alternative sources,” one of the diplomats told POLITICO . Another diplomat stressed that the 2028 date is likely to be an opening move with the hopes of simply getting any prolongation at all. The diplomats were granted anonymity to discuss a sensitive issue.
It is still unclear how much support the Czechs have for their demand from other countries such as Italy and Belgium. In Belgium, there is a push from the French-speaking part of the country to back the demand for a prolongation, as the sanctions are set to have repercussions in that part of the country. The Belgium-based NLMK Belgium is owned 49 percent by Wallonie Entreprendre, a Belgian investment fund owned by the Walloon region.
