VINACHEM

Imports of urea into the EU doubled in the wake of Moscow’s invasion of Ukraine

Europe is “sleep walking” into becoming dependent on Russian fertiliser, just as it did with gas, says one of the largest producers of crop nutrients.

Nitrogen fertilisers, which are important to plant growth, are made using natural gas and Russia is exporting more of it to Europe, replacing some of the gas banned by the EU, said Svein Tore Holsether, chief executive of Yara International, one of the world’s largest producers of nitrogen-based mineral fertilisers.

“Fertiliser is the new gas,” Holsether said. “It is a paradox that the aim is to reduce Europe’s dependency on Russia, and then now we are sleepwalking into handing over critical food and fertilising power to Russia.”

The EU imported twice as much urea, a common fertiliser, from Russia in the year to June 2023 compared with a year earlier, according to Eurostat. Russian imports for the current season, the year to this June, are lower but still historically high and account for a third of total urea imports into the bloc.

The price of crop nutrients soared in the wake of Moscow’s full-scale invasion of Ukraine in February 2022, as sanctions imposed on Russia limited availability of natural gas, a main input for nitrogen fertilisers such as ammonia and urea.

This hit European farmers financially while those elsewhere, especially in Africa, stopped using fertiliser altogether, hampering yields and deepening a global food crisis.

Since then fertiliser prices have eased as natural gas prices have come down, but Europe’s fertiliser industry is still struggling as Russian imports take a bigger share of the market, Holsether said.

Russian fertiliser producers benefit from lower energy costs, said Holsether, adding they also have fewer sustainability constraints and therefore produce more greenhouse gas emissions.

Russia is one of the world’s largest producers and exporters of nitrogen-containing fertilisers. This is also the case for potash and phosphate, which are mined and cannot replace the nitrogen-based fertilisers.

While Western sanctions carve out exemptions for Russian food and fertiliser exports, Moscow has complained trade has been hindered because of concerns from buyers and their banks and insurers over the involvement of sanctioned Russian individuals or companies.

Despite this, Russian fertiliser export revenue surged 70 per cent in 2022 on the back of higher prices.

Russia could use its increased dominance in the fertiliser market for political leverage — just as Moscow has done with energy supplies, said Holsether. “When you produce a product that is so important for food production, that’s a powerful tool,” he said. “And again, I think it would be naive to think that at some stage that will not be used for political purposes.”

“What we saw when fertiliser prices really increased is that Europe has an ability to pay that is higher than the global south. So if this is used [as leverage], again it’s the poorest that will pay the highest price.”    – Source: ft.com –