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Czechs push for longer exemption from Russia steel sanctions

Czechs push for longer exemption from Russia steel sanctions

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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 diplomats told POLITICO.

The automotive sector is a linchpin for the Czech Republic’s economy, accounting for about 10 percent of national GDP — one of the highest totals in the world. As home to big manufacturers like Volkswagen Group’s Škoda and Hyundai Motor’s Czech subsidiary, it is one of Europe’s leading automotive production and manufacturing hubs. 

Manufacturers need steel, which makes up a large proportion of the body and many other components of a car. And NLMK is a crucial supplier: It produces nearly all of its flat and long steel products in Russia, but nearly 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 — covering everything from energy to banking — in a bid to empty President Vladimir Putin’s war chest. But throughout the sanctions discussion, various EU countries have sought transition periods to win time to find alternatives to Russian imports elsewhere. 

The Czech Republic is now asking to prolong one of those transition periods to be able to continue using steel from NLMK, one of the four largest steel companies in Russia. Targeting its semi-finished steel imports is politically sensitive as the company continues to operate in Europe via subsidiaries in Belgium, France and Italy, with thousands of job losses on the line.

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 said. 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.

After Friday’s discussion by EU countries, the talks will continue with the hope of getting the package signed off before the next European Council in mid-December or by the end of the year at the latest.

Jacopo Barigazzi and Camille Gijs contributed reporting.

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