EU sanctions on Belarus target key fertiliser amid rising input prices

Farmers holding muriate of potash (MOP), a mineral fertilizers obtained from potassium chloride solution. [SHUTTERSTOCK/KOLIO]

The EU has banned all imports from Belarus of potash, an important fertiliser that is largely deficient in Europe, in a move that puts further pressure on the agriculture sector already struggling with an input price hike.

On Wednesday (2 March), the EU ambassadors approved a new package of sanctions targeting Belarus for supporting Russia in its military attack against Ukraine.

The restrictive measures included a total prohibition of imports of potash or potassium chloride, one of the three main chemical nutrients used in commercial fertilisers, the other being phosphate and nitrogen.

Economic penalties targeting Belarus potash exports were already introduced back in June in the aftermath of the forced landing of a Ryanair flight in Minsk that led to the incarceration of opposition activist Roman Protasevich and his girlfriend Sofia Sapega, both travelling to Lithuania.

“We are significantly widening the existing import prohibitions,” an EU official said on Wednesday (2 March), adding that the most imported type of potash that had been excluded back in June is now covered by the restrictions.

The measures adopted in June were estimated to rule out from the EU trade roughly 20% of the potash mined in Belarus. “Now it is 100% of all the potassium chloride, which is subject to the import restrictions,” said the EU official.

The source also explained that the idea was to have a gradual approach in June, which is the typical approach for EU sanctions as the bloc prefers to leave a certain margin to be able to react if the situation worsens.

“There was a political decision at the time only to target certain types of potash. Now we are reaching a situation where we’re ready to ban all types,” the EU official added.

Producers need to be quick

A ‘very short’ wind-down period of three months will allow Europe’s fertilisers producers to execute existing contracts signed prior to the adoption of the ban.

“After that, no more trade will be possible,” the EU official said, adding that this wind-down period is necessary only to close “existing loopholes”.

This decision marks a further tightening of the sanctions as the EU normally allows the full execution of existing contracts. “Given the gravity of the situation, we are going for a much stricter exception, allowing execution only for three months,” the EU official said.

The official warned that if EU operators want to wind down their activities, “they will need to do this very quickly.”

The biggest European fertiliser producer Yara already announced in January that will start sourcing wind-down from Belarus due to the effects of sanctions on the supply chain.

Other fertiliser’s main components nitrogen and phosphate are not included per se in the sanctions list. However, the June package already prohibited certain mixtures like in mineral chemical fertilisers containing the three fertilizing elements, as well as another mixture only containing phosphorus and potassium.

Price increase is expected

Although Germany is the fourth-largest potash producer in the world, the European Union is largely deficient in potash, with only a 6% share of global production of this raw material.

In 2020, EU imports of potash amounted to 2.4 million tonnes, with a share of imported potash equalling 85% of the total EU consumption, according to figures provided by the EU’s association FertilizersEurope

On average for the period 2018-2020, the share of Belarus origin in EU potash imports was 27%.

Contacted by EURACTIV, EU’s farmers’ association COPA-COGECA said it was difficult to have precise information at this stage about the potential impact of the ban on prices due to the market structuration.

“We expect price increases and disruptions though,” said a COPA-COGECA spokesperson, adding that there are some medium-term solutions but in the short term, the situation is tense.

Considering the world market, it is estimated that global annual potash production reached 43 million tonnes in 2020, with Canadian being a dominant producer with 14 million tonnes.

Replacing the 1.7 tonnes of Russian/Belarusian imports with Canadian origin, for instance, would be time-consuming and costly, according to EU farmers.

Some private companies are currently doing test drillings in East Germany to look for new potash mines. Some of the drillings have reportedly looked promising.

State aid for fertilisers

While a concrete evaluation of the extent of its impact is undergoing, the potash ban comes on top of the already existing worry concerning the rising prices of inputs.

The European Commission was expected to present a communication on Wednesday (2 March) on energy prices that would have addressed the increasing price of fertilisers as well.

“We’ve seen a drastic change of the situation, including in the fertilizer sector. There are no imports and no possibilities of imports,” the EU’s Agriculture Commissioner Janusz Wojciechowski said after a meeting with the EU-27 agriculture ministers on Wednesday.

“This is a very new situation, which is why we’ve decided that the communication will only come out on 8 March,” he added.

A leaked communication obtained by EURACTIV foresees the possibility of relaxing the strict EU state aid rules for the use of less conventional fertilisers now affected by increased gas prices.

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Julia Dahm contributed to the reporting

[Edited by Zoran Radosavljevic]

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