EU sanctions derail Russian fertilizers supply to Africa

On August 29 the European Commission released updated clarifications on the application of sanctions against fertilizers produced or exported from Russia - potassium chloride, as well as complex (NPK) fertilizers containing nitrogen, phosphorus and potassium. The new EU position makes it almost impossible to supply Russian fertilizers to the global market with EU economic operators, EU infrastructure and EU territory. This decision clearly directly contradicts earlier EU statements about not applying restrictions on trade in agricultural products and fertilizers between Russia and third countries and puts people in developing countries on the verge of starvation.

It is worth recalling that back on April 8, 2022, the EU imposed sectoral sanctions on these types of fertilizers of Russian origin. The purchase, import or transfer of these products to the EU in excess of the quotas set for the EU were banned: the quotas amount to 837.5 thousand tons of potassium chloride and 1,577.8 thousand tons of other types of fertilizers containing nitrogen, phosphorus and potash. It should be noted that initially the bans did not apply to the transit of Russian fertilizers to third countries using the EU infrastructure.

UN Secretary General António Guterres told reporters on Wednesday, September 14, that "To remove the obstacles that still exist in relation to the export of Russian fertilizers is absolutely essential". "There are ... talks in relation to the possibility of Russian ammonia exports through the Black Sea," said Guterres, adding that there was a "dramatic situation" in the world fertilizer market.

"We are risking to have fertilizer market crunch," he said. "We have news from different parts of the world where the areas cultivated are much smaller than in the previous cycle, which means that we risk to have in 2022 real lack of food."

On August 10, the EU tightened sanctions against the transportation of Russian fertilizers. The European Commission extended a ban on European operators' activities related to the transit through the EU territory of fertilizers destined for third countries. Moreover, now the supply of fertilizers to third countries even without the use of the EU territory and infrastructure will be considered a violation of the sanctions. The provision of transportation, transshipment and trading services by European companies, as well as any related services, such as insurance, financial and brokerage operations and technical assistance, is now prohibited.

Updated August 29 European Commission clarification contains a significant clarification, which can be regarded as a violation of the immutable principles of international trade. According to the European Commission's decision, operators from EU states are prohibited from making payments for Russian goods delivered to Europe even before sanctions were imposed. Since the payment is part of the fulfillment of the contract, the EC actually forced European operators to unilaterally violate contractual obligations to Russian suppliers.

By imposing more and more restrictions, the European Commission cites that all these measures support the goal of sanctions, which is to significantly weaken Russia's economic base by depriving it of its most important markets for its products and greatly limiting its ability to wage war.

When imposing sanctions in the spring of 2022 after Russia's invasion of Ukraine, the European Union stated that the targets of these sanctions were the Russian government, companies producing military products or services, officials making decisions in the military sphere, and public figures loyal to the Kremlin. The EU stated that the targets of the sanctions were in no way the Russian population, which had no direct or indirect relation to the conduct of military operations.

Despite these statements, the subsequent decisions of the European bodies have actually made ordinary Russian citizens hostage to sanctions. For example, European countries have significantly restricted or frozen the issuance of visas to Russians, which has put a barrier to mass tourism. Earlier, the banking payment systems Visa and MasterCard stopped servicing cards issued in Russia, the consequences of which were felt by most Russian citizens. Fearing sanctions, many Western companies producing mass-market products - household appliances, clothing, food, etc. - curtailed their activities in Russia, which also affected the interests of large segments of the population.

At the same time, European officials publicly continue their rhetoric that anti-Russian sanctions are not aimed at the population.

The EU sanctions race has also hit Europeans in the form of higher energy, food prices, and unprecedented inflation. Social tension is growing, protest sentiments in many European cities are gathering residents for rallies, and people are more and more openly expressing their dissatisfaction with the reverse effect of the imposed anti-Russian sanctions.

Now the European Union, represented by its supreme executive body, has gone even further, in fact extending sanctions to the population of the developing world. The prohibition on servicing Russian fertilizer transit operations to third countries has devastating consequences in the form of severe fertilizer shortages, declining agriculture, and the spread of hunger among billions of people in developing countries in Asia, Africa, and Latin America.

The new EU clarifications directly contradict both the numerous public statements previously made by European politicians and the general principles enshrined in the preamble to the seventh sanctions package, which proclaims food and energy security worldwide as the EU's priority. In particular, the preamble states that none of the measures provided for in the sanctions regulation is intended to restrict trade in agricultural products, including wheat and fertilizers, between third countries and Russia.

Moreover, the EU grossly violates the "Memorandum of Understanding between the Russian Federation and the UN Secretariat on Facilitating the Promotion of Russian Food and Fertilizers to World Markets," signed on July 22 in Istanbul. The memorandum was supposed to solve the problem of unimpeded supplies of Russian food and fertilizers to the world market, as well as to remove obstacles in the area of finance, insurance and other transit service operations.

However, this did not happen. In practice, the EU's sectoral sanctions on fertilizers have only cemented the impossibility of supplying such products to third countries involving economic operators, infrastructure or EU territory. Additional cynicism of the whole situation is given by the fact that the EU has set quotas on fertilizers in its interests, and removed them from the sanctions.

Meanwhile, Russia is ready to donate to African countries hundreds of thousands of tons of fertilizers stuck in European ports because of sanctions. If they are unblocked. The situation in the port of Riga (Latvia) is paradoxical. A vessel loaded with 55 thousand tons of potassium chloride produced by the Russian company Uralchem has been anchored there since early March (i.e., before the sanctions were imposed). Latvian authorities have been unable to make a decision regarding this cargo for more than six months, not allowing the ship to leave the port or to moor and unload the fertilizers.

Because of the actions of the EU, another document signed on July 22 between the UN, Russia and Turkey - the Initiative on the Safe Transportation of Grain and Foodstuffs from Ukrainian Ports - is actually not being implemented. - The so-called "grain deal". The document prescribes an algorithm for the export of Ukrainian agricultural products from the Black Sea ports controlled by Kiev, the task of coordinating which has been taken over by the UN. But out of 2 million tons of grain exported from Ukraine, only 3% was sent to the poorest countries, the rest went to the European Union countries. And since the restrictions on the export of Russian grain and fertilizers were never actually lifted, Russia may refuse to participate in the grain deal.

U.N. chief Antonio Guterres said he spoke with Russian President Vladimir Putin on Wednesday, 14 September about Ukrainian Black Sea grain exports and that he was hopeful a U.N.-brokered deal would be maintained and expanded to include Russian ammonia.

Following the logic of events, unfortunately further spread of bans and sanctions by the European Union on world trade in other categories of goods cannot be ruled out. And this means that the sanctions war could turn into a global humanitarian catastrophe in the future.

Jerry Jackson - Fertilizer market analyst, Africa Farming Council