EU agri-food producers need to ditch dependency on Russian fertilizers, flags farming body

16 Jan 2024 --- Since the beginning of the Ukraine conflict, the EU’s entanglement with Russia has breached more fronts beyond energy. Navigating through the aftermath of global grain repercussions triggered by Russia’s withdrawal from the Black Sea Grain Initiative (BSGI) last year, European food producers now grapple with the pressing challenge of overdependence on Russian fertilizers to keep local production buoyant.

“In the view of EU farmers and agri-cooperatives no dependency is good. Of course we do not like to see these developments and especially the increase in dependency on Russian fertilizers,” Ksenija Simovic, senior policy advisor at the European farming coalition Copa-Cogeca, tells Food Ingredients First.

“The truth is that [fertilizers] are an essential input for the EU’s crop production and necessary actions must be put in place to ensure that farmers can maintain their level of productivity while decreasing their dependency on mineral fertilizers,” she continues.

“This also includes furthering the options of use of organic based fertilizers and technologies that make it possible to upgrade nutrients from manure to ammonium salts.”

Eurostat data reveals there was a 34% increase in total nitrogen imports into the EU during the 2022-23 fertilizer marketing campaign.Russia’s export playing card
The CEO of Norwegian fertilizer supplier Yara International, Svein Tore Holsether, flagged the issue at a recent Brussels press conference.

“Europe has succeeded in reducing its dependence on Russian energy, but at the same time we have created new dependencies. For food, we are now more dependent on Russia than before the war,” he stresses.

“We shouldn’t be naive about this issue after seeing how energy was used as a weapon. This is a very powerful weapon to give to Putin, because at some point he will use it.”

Eurostat data disclosed during the Brussels meeting reveals there was a 34% increase in total nitrogen imports into the EU during the 2022-23 fertilizer marketing campaign (July-June) compared to the preceding period. Russia contributed approximately one-third to the overall total.

Urea imports from Russia rose significantly by 53%, marking a twofold increase from the volumes observed in 2020-2021, with Moscow alone supplying 40% of the total.

While the current season has seen a moderation in this trend, Russian urea remains an essential commodity, representing almost one-third of the total imports.

Holsether stresses the need for the EU to prepare for an escalated situation.

“If we face another shock in fertilizers or food, we can no longer blame Putin, but then the reason is that we were not prepared.”

Holsether also warns about the ripple effects of the EU’s elevated energy expenses, coupled alongside expenditures related to climate policy. He notes that these factors all contribute to the relocation of energy-intensive production activities, such as fertilizer manufacturing, outside the EU.

“Europe is taking a huge risk in outsourcing vital production, and not just in fertilizers.”

Yara International stands as the largest private industrial consumer of natural gas in Europe, accounting for roughly 1% of the total natural gas consumption across the continent.

Urea imports from Russia rose significantly by 53%, marking a twofold increase from the volumes observed in 2020-2021.EU sanctions
On 17 July, nearly one year after it was signed in Istanbul, Russia decided to not renew the BSGI that allowed Ukraine to export agricultural goods to global markets. As underlined by the Secretary General of the UN, this initiative had been “a beacon of hope in a world that desperately needs it.”

Just days after Russia pulled out of the BSGI, reports followed that the country attacked grain terminals in the Ukrainian city of Odesssa, destroying 60,000 metric tons of grain.

As an immediate reaction, wholesale wheat and maize prices saw their biggest increase since the start of Russia’s war of aggression. The EU anticipates increased food price volatility is likely to persist as long as Russia puts global food supply under deliberate stress, aggravating the global cost-of-living crisis and most acutely for food-insecure people in import-dependent countries.

As the world deals with disrupted supplies and higher prices, Russia has approached vulnerable countries, notably in Africa, with bilateral offers of limited grain shipments — “pretending to solve a problem it created itself,” as Josep Borrell Fontelles, high representative of the Union for Foreign Affairs and Security Policy and vice president of the European Commission, comments.

Despite this, EU sanctions explicitly exclude food supplies and fertilizers — there are no sanctions on Russian exports of these commodities to global markets. Only luxury food products, like caviar, are prohibited from being imported from Russia into the US or in the EU.

The established import restrictions on certain potash fertilizers apply only to products imported to the EU from Russia, and do not concern exports of them to Ukraine either from the EU or from Russia.

However, these “carve outs” may not work perfectly, as the International Food Policy Research Institute (IPRI) underscores. 

“Even if sanctions do not directly target food and fertilizer exports, some do target individuals — such as oligarchs — who may have business interests in these sectors, and in general they can make trade more difficult,” says Joseph Glauber, senior research fellow at IFPRI.

“For example, importers may choose not to purchase from Russia and Belarus because of the added costs of doing business (for example, having to deal with more restrictive banking regulations), or due to overcompliance, i.e., the perceived risk, even if erroneous, of being ensnared in financial sanctions for having done business with these countries.”

By Benjamin Ferrer