EU agrees to ease Russia fertilizer curbs after row, angering Ukraine

The EU resolved a fight by agreeing to ease curbs on Russian fertilizer exports as part of a new sanctions package on Thursday, drawing a rebuke from Ukraine.

The fight had pitted Western Europeans calling to loosen restrictions on Russian fertilizer exports against an Eastern caucus led by Poland that wanted to maintain an existing blockade. It was only resolved after EU leaders meeting for a summit in Brussels sent the issue back to ambassadors to break the deadlock, diplomats said.

The two sides had been at odds over whether existing sanctions made it too difficult to supply fertilizers to third countries, increasing the danger of famine in Africa at a time when Russia’s war on Ukraine has already disrupted global food supplies.

In one corner, six Western European countries had called for a clearer carveout to unblock shipments of fertilizer now stuck in port because of concerns among intermediaries that handling such cargoes would make them liable for violations.

In the other, four Eastern member countries had warned that any greater leeway would effectively bail out President Vladimir Putin and the crony oligarchs who own Russia's fertilizer industry, enabling the Kremlin to continue funding its war of aggression in Ukraine.

The deal, a classic European compromise, will take effect if no EU members object by Friday lunchtime. In it, the language was made more limited and specific, which was key for Poland and the Baltic countries. The group of Western countries was happy that there was now more clarity.

Ukraine was furious.

“Attempts to allow Russian oligarchs and companies to derogate from the already imposed EU sanctions deal a blow to the entire sanctions regime, undermine support for Ukraine & our joint effort to stop Putin’s war machine,” Foreign Minister Dmytro Kuleba wrote on Twitter. “We strongly oppose them & thank EU members who do so too.”

Both Russia and Western European leaders say their goal is to save Africa from famine.

But, while sanctions are hurting African food security, fixing the global fertilizer crunch will not solve a crisis that long predates the war in Ukraine and is caused by many more factors. It would, however, open up Russia’s fertilizer export markets and lower prices for Western European farmers.

Stumbling block

Since the EU first launched sanctions against Russia in February, exemptions have been carved out for food and fertilizer. The Kremlin argues, however, that sanctions targeting individual oligarchs, such as ammonia baron Dmitry Mazepin, and Russia’s main agricultural bank, are preventing the country exporting fertilizer as well as the ammonia needed to make it.

This was a stumbling block that nearly saw Russia pull out of a U.N.-brokered deal allowing Ukrainian grain to be exported from Black Sea ports that was, after a standoff, extended last month.

Ports in the Netherlands, Belgium, Latvia, Estonia and Lithuania have also become congested with Russian fertilizer cargoes. While EU sanctions do not target agriculture, they’ve created a sense of legal uncertainty, Western and Russian diplomats have said, making it harder for Russian companies to access funds to cover transport costs and turning European operators skittish about engaging with blacklisted entities.

Polish Prime Minister Mateusz Morawiecki had called for EU member states to bolster and extend the sanctions, as he arrived for the summit earlier. “Food security should not be used as a cover for relaxation of the sanctions while Ukrainian civil people are dying under Russian bombs,” Lithuanian President Gitanas Nausėda had told POLITICO.

Going hungry

More than 145 million Africans are currently going hungry, the Red Cross estimates. Some 26 million in Ethiopia, Kenya and Somalia face acute food insecurity, and the number is rising.

Russia’s narrative, that the EU’s sanctions are to blame, has taken hold in many parts of the continent. In a recent U.N. vote on a resolution condemning Russia’s attempt to annex Ukrainian territory, more than two fifths of African countries abstained or voted against.

And it’s not all fiction. Fertilizer shortages and rising prices as a result of Russian supplies being held up in European ports have a direct impact on African food production. Some countries rely to a large extent on Russian exports. Before the outbreak of war in Ukraine around 40 percent of Ghana’s fertilizer stocks, for instance, came from Russia.

Fertilizer prices have risen by 199 percent since May 2020, according to the U.N.’s World Food Program (WFP), and fertilizer shortages are estimated to have cut this year’s global production of maize, rice, soybean and wheat by 2.4 percent.

In May, Akinwumi Adesina, president of the African Development Bank, said that if the fertilizer shortages were not mitigated, the continent would face a decline in food production of “at least 20 percent.”

However that overestimates the risks by a large margin, according to David Laborde Debucquet, a Senior Research Fellow in the Markets, Trade and Institutions Division at the International Food Policy Research Institute (IFPRI). Although rising prices will lead to fertilizer shortages globally and “maybe more in Africa,” he explained, to begin with Africa “depends less on fertilizer to produce.”

Only around 4 percent of Russia’s fertilizer exports went to Africa before the war, he pointed out. While EU sanctions contribute to Africa’s food insecurity, they are only a small part of a much bigger picture: strengthening exemptions for Russian fertilizer and food exports won't make as much difference in Africa as Western European governments — motivated more by self interest than altruism — claim.

That said, the Eastern bloc is also exaggerating the importance of these exemptions, said Debucquet. Fertilizer and food exports only earn a small share of Russia’s export revenue, and they’re controlled by only a handful of oligarchs. So, while freeing up the flow of agrichemical products might be in the interest of a narrow group of people, “you will never change the Russian position on anything by allowing more or less trade of these."

And, in fact, Russia’s fertilizer industry may not be hurting all that much either. While export volumes have been down 10 percent compared to last year, the profits of Russian manufacturers, propped up by the higher prices, have remained largely unscathed, according to country officials.

“Despite the external restrictions experienced by Russian companies — the disconnection of banks from the SWIFT system, problems with cargo vessels, frozen bank accounts — the current market conditions allow us to maintain the level of exports in value terms," the Russian industry and trade ministry recently told the Interfax news agency.