By international affairs specialist Glen Hodgson of Swedish think tank Free Trade Europa
Sweden has been a steadfast supporter of Ukraine, providing financial aid, humanitarian assistance, and military support. However, imposing sanctions on Russian imports as a form of public relations move represents misguided policy. Such sanctions would inflict economic harm on Sweden without significantly impacting Russia, ultimately amounting to virtue signaling at the expense of the broader strategic interests of both Sweden and the EU.
The imposition of sanctions on Russian aluminum imports – which is reportedly being considered by EU officials – would be a case in point, since this would inevitably lead to the Kubal smelting plant in Sundsvall shutting down. Such a closure would not only result in significant job losses but also have broader economic and strategic implications for Sweden and European partners, while having minimal impact on Russia.
Economic impact and job losses
The closure of the Kubal site in Sundsvall would directly lead to the loss of 500 jobs in an area where employment opportunities are already limited. Additionally, the Swedish aluminum industry as a whole would suffer, potentially losing 5,000 jobs in related industries. These losses would devastate the local economy, affecting thousands of families across Sweden: not to mention the broader supply chains across Europe that both feed into, and then take products from, Kubal.
The shutdown of Kubal would also weaken Sweden’s strategic position within the European aluminum market. This loss would extend beyond Sweden’s borders, undermining the industrial base of key EU Member States such as France and Italy. Across the EU, the aluminum industry directly employs approximately 230,000 people and supports an additional one million jobs indirectly. The ripple effect of Kubal’s closure would thus threaten these jobs and the economic activities they support.
Beyond jobs, the plant produces 120 metric tonnes of aluminum at a utilization rate of 94% of its capacity. Half of the plant’s output is shipped directly to Swedish customers, while the remainder is sold across Europe. Aluminum is crucial for several key industries in Sweden, including the automotive, construction and manufacturing sectors.
EU imposes sanctions on Russian LNG – it's a first-ever measure against Russia’s gas part of latest restrictions against Moscow https://t.co/yaYt3433hR via @ft
— Vytas Leškevičius (@Leskevicius) June 21, 2024
Challenges of transitioning to alternative suppliers
There is no viable substitute for Russian raw materials at the Kubal plant. That is simply the economic and business reality. Sanctions would be comforting for some, and would allow political leaders to claim that ‘something is being done’, but the harm would be imposed not in Russia, but in Sweden. Imposing sanctions, and the related closing of Kubal, would increase European reliance on Chinese sources for bulk aluminium. How is that a preferential outcome to today, where Sweden has a firm foothold in the European supply chain for this critical mineral? Russia is not popular for obvious reasons, but 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.
Even in the highly unlikely event that transitioning to alternative aluminum suppliers is possible, this shift would be extremely costly and time-consuming. Establishing new supply chains would lead to production delays and increased operational complexity, negatively impacting industries dependent on aluminum. These disruptions would undermine the years of hard work to make Kubal a success both for the local area and for Europe’s critical mineral supply chain, as well as harm the competitiveness of Swedish businesses, both domestically and internationally.
Furthermore, restricting the supply of raw materials would stoke inflation at precisely the wrong time. Price rises would be inevitable for aluminium products and this would negatively impact companies and consumers who are already struggling. Price instability would also have wider economic effects in Sweden as well as across Europe. The increased costs of raw materials would almost certainly be passed on to consumers, leading to higher prices for goods and services.
A history of sanctions: https://t.co/TZkl9cEQna
— Pieter Cleppe (@pietercleppe) June 20, 2024
The economy is more important than virtue signaling
Sanctioning Russian aluminum imports could result in significant economic and strategic challenges for Sweden, as well as the European Union as a whole. The closure of the Kubal plant would lead to job losses, disrupt supply chains, and undermine Europe’s strategic autonomy. While Sweden’s support for Ukraine is commendable, it is crucial to consider the broader economic implications of sanctions against Russia. Politicians and policymakers must strike a balance between political objectives and the economic well-being of the nation. As such, they need to withstand pressure from other EU members as well as third-party governments to impose self-defeating sanctions. Standing up for the interests of Swedish business and Swedish workers has never been more important.
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