British steelmakers are calling on the government to close the Russian sanctions loophole

British steelmakers have urged the government to follow the EU in closing a loophole in the sanctions regime against Moscow that allows indirect imports of Russian steel from third countries.

March UK Import tariffs of 35 percent imposed on all semi-finished steel products from Russia as part of a package of economic sanctions following the full-blown invasion of Ukraine. A month later all imports of finished steel were banned.

Despite these measures, Russian steel that is processed into other steel products in third countries is still being imported, according to trade organization UK Steel – bringing billions in revenue to Moscow and undercutting domestic manufacturers by selling it at cheaper prices.

The EU said last month it would introduce tougher sanctions against Russian steel over the next two years that would shut down the route, but Britain has yet to crack down.

Gareth Stace, chief executive of UK Steel, said the government must act “quickly and decisively to close any loopholes weakening our sanctions against Russia”.

He added: “Last month the EU extended its sanctions to Russian steel processed in third countries from October 2023, cutting off a key supply route for Russian steelmakers. Given the UK’s ability to now act independently outside the EU on these issues, it is frustrating that the UK has not already implemented a similar increase in sanctions.”

A UK industry executive said Russia was using “significant market rebates” because it was “desperately trying to offload basic steel products to third countries. . . So the price in UK is not competitive. Economic implications aside, it feels morally wrong that Russian steel is still in the UK supply chain.”

Due to country of origin rules, it is difficult to determine where steel was made once it has been completed. “When base steel from Russia is finished in a third country, it acquires a new country of origin,” said a British executive.

The UK government did not specifically respond to industry concerns about indirect imports. It said it had “seen no evidence of illegal Russian steel imports entering the UK market” and that it had “moved faster and further than others, including the EU, in banning imports from Russia”.

Until the broader EU ban comes into effect, some of the main sources of processed steel imported into the UK will come from parts of the bloc, including Belgium. Another source is Turkey, which has refused to sign sanctions against Russia.

Eurofer, the group of EU steel producers, had called for an immediate EU crackdown and criticized the “very long grace periods” it put in place before the broader ban came into effect.

The Belgian government had resisted tightening EU restrictions. Alexander de Croo, the country’s prime minister, fought to delay the tougher measures as they affected two plants in the southern region of Wallonia owned by a subsidiary of Russian steelmaker NLMK.

When the new restrictions were announced last month, he warned they could reduce public support for aid to Ukraine if they lead to severe job losses.

“The question is how we can maintain the solidarity of European countries and our people to continue supporting Ukraine,” he said. “Certainly, Ukraine’s military successes help. . . but when the economic costs get so high that people lose their jobs, it becomes difficult.”

Belgium declined to vote for the package but did not veto it. It was the first time in eight rounds of sanctions that one of the 27 member states had not voted in favour.

NLMK Belgian Holdings employs 1,200 people in one of the poorest areas of Belgium. It is 49 percent owned by Sogepa, the Walloon government’s investment fund. NLMK told the FT: “Respect[ed] all sanctions and laws in force”. British steelmakers are calling on the government to close the Russian sanctions loophole

Adam Bradshaw

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