By international affairs specialist Glen Hodgson of Swedish think tank Free Trade Europa
The American businessman, investor and author Ben Horowitz once stated that there is no silver bullet. There are options, and the options have consequences. European leaders would be well advised to keep these sentiments top of mind with regards to the implication of sanctions on Russian aluminium imports for EU industry, competitiveness and consumers.
The EU adopted its 16th sanctions package on 24th February 2025 and this includes a direct ban on EU imports of primary aluminium from Russia. While the objective of these measures is well-intentioned, they will ostensibly inflict economic harm on Europe without significantly impacting Russia, ultimately amounting to virtue signaling at the expense of the broader strategic interests of the EU.
The proposal to completely ban Russian aluminium is negative for the European Union, and will further disrupt Europe’s metal supply chains. It will trigger cost inflation, production curtailments, and a likely reduction in manufacturing competitiveness. A 20-30% price surge is likely once Russian volumes are removed and alternative suppliers charge premiums. Immediately, a range of sectors from automotive and aerospace to packaging and construction would absorb the brunt of these increases, potentially reducing industrial output and costing thousands of jobs if firms cannot pass along higher prices. Financial markets will respond with swift gains in aluminium futures, mirroring past sanction episodes, and equity valuations might decline for major aluminium-consuming sectors. Over a year or more, new trade flows could eventually stabilise supply, but the EU’s reliance on more expensive sources – coupled with limited domestic smelting capacity due to high energy costs – would impose a lingering price disadvantage.
The European Union (EU) will likely maintain sanctions on Russia despite Russian demands for Western sanctions relief as preconditions for a temporary ceasefire with Ukraine in the Black Sea.⬇️ https://t.co/KL4MQgNxpy pic.twitter.com/0HumqCqtWv
— Institute for the Study of War (@TheStudyofWar) March 27, 2025
A huge blow for EU industry and jobs
The aluminium industry in Europe – which directly employs approximately 230,000 people in the EU and supports an additional one million jobs indirectly – will be threatened. EU member states – especially France, Germany, Italy, Austria, Hungary, Sweden and Slovakia – will shoulder the lion’s share of the economic burden, with higher costs, lower outputs and inflationary pressures that will persist well beyond the initial shock.
By way of national examples, a ban on Russian aluminium would have a major impact on the already beleagured German automotive sector through increased production costs, resulting in lower profit margins and/or higher prices for the likes of Volkswagen, BMW and Mercedes-Benz. Similarly, the French aviation sector will be heavily affected, with Airbus and Dassault requiring new supply contracts and incurring higher costs for aviation-quality aluminium. Furthermore, the coastal town of Dunkirk in northern France is home to the largest aluminium smelter in Europe and has reduced production due to energy costs, limiting domestic supply options. In parallel, Italy has a broad manufacturing base that will be struck, particularly the automotive, packaging, and construction sectors. Moreover, Italy’s large contingent of SMEs in metalworking will be vulnerable as they are less able to absorb price increases.
A boon for China
The sanctions will divert cheaper Russian aluminium to non-sanctioning countries such as China, putting European manufacturers at a permanent cost disadvantage. Never one to waste a good crisis, Beijing has already benefited substantially from similar embargoes on energy and copper. China will gladly enter a buyer’s market for Russian aluminium. Historical precedents, ranging from the 2018 Rusal sanctions to the 2022 ban on Russian steel, demonstrate that bans frequently prompt trade diversion and rerouting rather than full elimination of commodity exports.
The perverse outcome is that European manufacturers will face higher input costs while Chinese competitors gain access to the same materials at substantial discounts – with secondary products making their way back to the EU. This will erode EU manufacturing competitiveness precisely when European industries are already struggling against Chinese imports.
Russia is not popular for obvious reasons, but Europe is between a rock and a hard place. Trading one risky source for another, while increasing the stranglehold that Europe’s rivals have on raw materials, is not sensible and does not represent mature policy-making. Politicians and policymakers must strike a balance between political objectives and the economic well-being of the continent.
Forget about SWIFT, the EU tells the Kremlin.
Sanctions relief will only happen when the invasion of Ukraine comes to an end and peace is achieved.https://t.co/7ZU2xtV2Ji
— Jorge Liboreiro (@JorgeLiboreiro) March 27, 2025
Time for an EU rethink
The proposed EU ban on Russian aluminium is best described as a massive economic miscalculation. Aluminium imports should be removed from the sanctions package on account of the negative and unproportionate impact that the ban has on European industry, SMEs and consumers across the EU. Emotions are running high but European Union members should not cut off their nose to spite their face in the desperate search for a silver bullet in the Russia-Ukraine conflict.
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