After the Ukrainian War, the West struck Russia with a immense amount of economical sanctions. But despite their destructive force, it turned out that not all products can be effectively fought. 1 of them is fertilizer. For a simple reason – fertilizers are food, only a small later.
The first impact on fertilizers was strong, although fertilizers were not straight sanctioned. However, owners of Russian fertilizer companies – EuroChim, Uralkalij, FosAgro or Akron, were subject to individual sanctions in Europe, large Britain or Switzerland. Therefore, with Russian exporters, like those infected, everyone was afraid to do business.
The increase in sea freight costs, plus a 10% increase in financial costs, plus a massive increase (+40%) in the cost of spare parts, which had to be reduced by intermediaries, bypassing export bans. In addition, Russian ships have been banned from the European ports and large sea carriers (like Maersk) have fled Russia. The higher costs request to be added (and deducted from profits) to the extra margins requested by the buyers, utilizing the fact that Russian products have become "failing". Just like oil.
Immediately after the introduction of EU sanctions against the Russians, the owners of businesses and banks operating transactions, more than a 4th of a million tonnes of fertilizers were arrested in European ports in the ports of the Baltic States (then 30% of Russian exports of fertilizers were carried out).
Prices, dragged speculatively up for six months, fired at the ceiling. The global larum rose to this, that economical warfare in fertilizers leads to famine in mediocre countries. The United Nations has entered the action demanding that both Russian and Ukrainian grain and fertilizers can freely scope the planet market.
The U.S. officially explained in July ’22 that no sanctions were in place to export fertilizer food from Russia. OFAC (Jęczniak: The office of the global economical war | Think Poland (myślpolska.info)) issued precise instructions on this matter, and even traders were unofficially encouraged to acquisition Russian fertilizers. Financial institutions were ensured that fees with trade in agricultural goods (including fertilisers) could be made through SWIFT and are not subject to sanctions.
Europe withdrew from the restrictions after the first attack. In December 2022 Chancellor Scholz promised that the Union would not interfere with the trade in Russian fertilizers, as this is simply a key issue for food safety in the world. By the end of the year, the “freezing” of requisitioned fertilizer loads in ports had slow begun, but so far almost a 100 1000 tonnes have been trapped in them. The West bent under the force of all those for whom the script of cutting off Russian fertilizers looked hunger in the eyes.
As a consequence of the full turmoil in 2022, production in Russia decreased by 11%, to 54.3 million tonnes. However, this afraid only potassium fertilisers, whose production decreased by a 3rd as the another (nitrogen and phosphorus) increased slightly. Exports besides decreased by 15% (to 37.6 million tonnes). This was the level in the tons before the crisis, but the income in dollars proved to be much higher. erstwhile exports had previously brought $12.5 billion, in ‘22 – as much as $19.3 billion had powered the Russian economy. In another words, what they took from Russian exporters from the sanctions, has given the volatile commodity markets, inducing the prices of bulk products to the ceiling at any hazard on the market.
Russia is the planet leader in fertilizer exports occupying 1/6 of the global marketplace for potassium and 1/10 nitrogen fertilisers. Even this trade war with the West did not take Russia's position. He is inactive the second (after China) maker of them. Exports were redirected to friendly countries, primarily India, which increased purchases of Russian fertilizers 3 times and became the largest Russian export market. Similarly, as in oil (Jęczniak: India earns on Russian oil | Przemysł Polska (myślpolska.info)). The purchases of fertilizers ( offered by Russian retailers with large price discounts, forced by western boycotts) besides increased China and Brazil and another Asian countries.
However, sanctions and restrictions accomplish certain objectives. They break the anticipation of beneficial cooperation, both for Russia and Europe. Russia has a immense mineral and natural material potential, but this branch of manufacture depends both on access to technology and to outlets. The Russian fertilizer business was cooperative, the largest invested abroad, specified as EuroChim, and Akron (known to us as a shareholder of the Azots) as much as 80% of his business assets were abroad. The imposition of sanctions on them interrupted the expansion. That's what sanctions are for.
Andrzej Szczęsniak
photo profile fb FosAgro
Myl Polska, No. 13-14 (24-31.03.2024)
