The European Union is continuing its aggressive anti-Russia campaign aimed at undermining Russia as a responsible player on the global market of agricultural products and fertilisers. These actions may worsen the already challenging global food security situation. Responsibility for this lies entirely with the EU.
1. Myth: “Our sanctions are not the cause of food shortages. They only target the Russian ability to finance the military aggression - not the conduct of legitimate trade. The sanctions do not prohibit imports or transportation of Russian agricultural food or fertilisers, or payments for such Russian exports.” (Source: Speech by High Representative of the EU for Foreign Affairs and Security Policy Josep Borrell at a UN Security Council meeting on June 16, 2022).
Myth: “The European Council underlines that EU sanctions against Russia allow the free flow of agricultural and food products…” (European Council Conclusions on Ukraine, June 23-24, 2022).
Fact: Brussels is once again prevaricating as it continues its attempts to manipulate public opinion. It is doing so despite the fact that Russia is a world leader in supplying agricultural products and that a significant portion of our exports go to at-risk countries that may face food shortages. The EU sanctions openly pursue the goal of undermining Russia's foreign economic activity, including in the agro-industrial sector.
The European Commission’s clarifications concerning the use of the provisions of EU Council Regulation No. 833/2014 concerning trade restrictions with regard to Russia (General Questions. Frequently asked questions – as of May 24, 2022. Question 20) expressly state that they are deliberately drafted very broadly in order to ensure the prohibition of the widest possible range of export and import operations. On the Council of the EU website in the section titled “Clarifications on sanctions against Russia” (www.consilium.europa.eu), it is emphasised that the list of sanctioned goods is compiled so as to cause the most negative damage to the Russian economy. EU Council Regulation No. 833/2014 provides that the ban on the sale, export, transfer of goods should prevent Russia not only from receiving significant profits (art. 3i of the regulation), but also building up its industrial potential (art. 3k).
EU Council Decision No. 2022/582 dated April 8, 2022, introduced personal sanctions on shareholders/management of the leading Russian producers and exporters of fertilisers such as Uralchem, Eurochem, Phosagro, and Acron. The direct consequences of the EU restrictions include blocking goods in warehouses located in the EU, restricting the use of funds on bank accounts in and outside the EU (for example, in Switzerland), and prohibiting the transit of goods to buyers through the territory/water area of EU member states. As a result, there are significant problems with the sale of products on international markets. So, in May 2022, 2.5 million tonnes of liquid ammonia owned by the Russian company Uralchem were blocked at the Latvian port of Ventspils.
EU Council Regulation No. 833/2014 prohibits importing to Russia certain goods that are needed for the production of fertilisers and agricultural products (parts and components, equipment and agricultural machinery itself, including hydraulics and casing elements, radiators, gearboxes, equipment for controlling pesticide consumption, knives and cutting blades for agricultural machinery, ceramic gutters, vats and tanks used in agriculture, self-loading trailers and semi-trailers, as well as software for intelligent machines).
This regulation provides for disconnecting 10 banks from SWIFT, including Rosselkhozbank that services Russian agricultural exports (according to EU members, the goal is to return these financial institutions to the times when each transaction was confirmed by fax and telephone), as well as a ban on the provision of financial, brokerage and insurance services to Russian companies in a number of areas of economic activity. The same document prohibits, explicitly or implicitly, the transfer of navigational goods and maritime navigation technologies and the provision of corresponding technical assistance, which can also limit Russia’s ability to export food and fertilisers.
EU Council Regulation No. 833/2014 introduces a ban on imports and the transit of a number of mineral fertilisers. The exemptions referred to by European officials provide for an authorisation-based (at the discretion of specific EU member states) procedure for motor transport and sea deliveries of agricultural products and fertilisers that do not fall under sanctions.
All this significantly limits Russian companies’ ability to maintain trade relations with their foreign partners, obstructs or even makes impossible the movement of Russian merchant fleet ships carrying agricultural products, not to mention overcompliance in terms of following the existing restrictions on trade with Russian partners on the part of foreign economic operators, not only from the EU, but from other countries that have joined the sanctions as well. As a result, the number of international companies that are ready to serve, transport, insure and transship cargo from Russia and provide related financial services has decreased, while freight and insurance prices have risen sharply.
Brussels did not stop there and has come up with a proposal to “criminalise,” at the EU level, the circumvention of or assistance in attempts to circumvent unilateral anti-Russia sanctions. Specifically, we are talking about criminal prosecution in the EU of individuals who,explicitly or implicitly, contribute to bypassing the restrictions. With regard to legal entities, it is proposed to introduce fines and other enforcement actions up to suspension of activities or liquidation. Other European Commission ideas include criminal punishment for “inciting” the circumvention of the sanctions, which can include public criticism of the EU’s sanctions.
2. Myth: “Furthermore, EU financial sanctions only apply on EU territory… So our measures do not affect the ability of third countries to purchase from Russia if they wish.” (Source: Speech by EU High Representative for Foreign Affairs and Security Policy Josep Borrell at the June 16, 2022 UN Security Council meeting).
Fact: According to Article 13 of EU Council Regulation No. 833/2014, all sanctions restrictions, including on financial transactions apply, apart from EU territory, “on board any aircraft or any vessel under the jurisdiction of a Member State;…(c) to any person inside or outside the territory of the Union who is a national of a Member State; (d) to any legal person, entity or body, inside or outside the territory of the Union, which is incorporated or constituted under the law of a Member State.” The latter category concerns the rendering of payment, banking, insurance or transport services by European or international companies with European participation. Anyone committing the above could be accused of violating the anti-Russia sanctions for the transfer of goods and technology covered by sanctions.
The SWIFT ban for ten Russian banks means in practice that they have been deprived of any chance of making normal international transactions with their foreign partners in over 200 countries that use the SWIFT system. Alternative options are possible but they take time whereas third countries need grain and fertiliser here and now.
It is also necessary to take into account the EU’s policy of forcing some third countries into incorporating provisions on the EU Council’s anti-Russia sanctions into their legislation. As of today, Albania, Iceland, Lichtenstein, North Macedonia, Norway, Montenegro and Ukraine have been joining the EU’s restrictions on a regular basis.
3. Myth: “In support of UN efforts, we are ready to look into possible mis- interpretation of EU sanctions that could lead to over-compliance or market avoidance and further clarify to economic operators what is and what is not targeted in our sanctions. We are ready to work with all partners in this regard.” (Source: Speech by EU High Representative for Foreign Affairs and Security Policy Josep Borrell at the June 16, 2022 UN Security Council meeting).
Myth: “On the banks, some Russian banks have been taken out of the SWIFT system, but not the whole financial system of Russia is de-SWIFTed… but certainly I cannot avoid that some financial institutions…decide voluntarily not to participate in this trade. This is what is called overreaction or over-compliance… But it’s one thing that practical problems are related to over-compliance and another thing that our sanctions created the problem.” (Source: Replies by High Representative Josep Borrell at a news conference after the June 20, 2022 EU Foreign Affairs Council session).
Fact: The European Union is once again trying to mislead the world public. According to Article 13 of EU Council Regulation No. 833/2014, it is the EU countries that have been delegated the right to impose a system of fines and penalties for the violation of restrictions. Obviously, the EU has also relegated the interpretation of what constitutes a violation to the national level. This could result in 27 interpretations (one for each EU member state) of the same action. The European Commission and the European External Action Service can only provide “explanations” that do not guarantee the non-use of a penalty for violating the sanctions requirements.
Since February 2022, the EU has introduced six packages of illegitimate anti-Russia sanctions. Obviously, they are scaring economic operators apriori. The European Commission has issued over 200 pages of “explanations” for these restrictions. But it says on the first page of this document that they are not legally binding. In this case, Brussels is not entitled to make any decisions for the individual EU states.
4. Myth: “The Russian war of aggression against Ukraine has led to a significant drop in food, animal feed and fertiliser availability, significant price increases for food, energy and fertilisers, and has aggravated global food insecurity.” (Source: EU Foreign Affairs Council Conclusions of June 20, 2022).
Fact: Russia is not at fault for the current food security crisis. A sharp increase in prices on the commodities and raw materials markets began as early as 2020, causing concern in the EU even then, – long before current events. The reason lies in the EU’s own errors in of its macroeconomic, energy, climate and food policies in recent years. We are referring to the uncontrolled money printing that led to the EU’s increased imports, the funneling of commodity flows, and accumulation of unsecured debt. The West’s stake on spot prices for gas led to energy price increases and a higher cost of many commodities and services, including that of the EU’s own agricultural productions. An accelerated transition to green energy played a role in its own right. The production of fertilisers, primarily nitrogenous fertilisers (based on natural gas) was artificially curtailed, while the demand for biofuel and agricultural crops required for its production went up. The lack of fertilisers cuts crop yields, increasing the risk of reduced food supplies to the world markets in coming seasons and, as a consequence, the risk of hunger in the poorest countries. In addition, the situation is aggravated by the socio-economic consequences of the COVID-19 pandemic, adverse weather, and draughts in some regions.
In trying to rebuild the world system of economic relations to its own advantage and impose its own rules, the EU fell into a trap created by its own ambitions. Under the circumstances, the West used Russia’s special military operation in Ukraine and Donbas as an excuse to conceal its own mistakes from the world public and its own citizens. This is why it is trying so hard to substitute notions and cause-and-effect relations. In reality, a bad situation was made worse by the reckless anti-Russia sanctions that caused a further disruption of the logistical and financial chains and provoked growth in insurance and freight costs.
According to UNCTAD, the problem lies in the lack of access to food products rather than a physical shortage of food on the global scale. FAO’s summary on grain production in the 2021-2022 season indicates that the world’s grain reserves have grown considerably over the past year to a record 850 million tonnes. The prospects for grain trade are also good.
Negative expectations from sanctions and threats of their introduction can only provoke food price increases on the world market. In its June 14, 2022 report on the consequences of Russia’s special operation in Ukraine and Donbas for the EU economy, the European Investment Bank lists the sanctions against Russian agricultural products among the factors contributing to the preservation of high food prices.
5. Myth: “If you look at the number of people suffering from hunger before the pandemic, after the pandemic and after the war, you will be terrified by the increase in the number of people suffering from a dire economic situation and on the edge of poverty and hunger.” (Source: Foreign Affairs Council: Remarks by High Representative Josep Borrell at a June 20, 2022 press conference).
Fact: The EU tells the world about its serious concern over the scale of an impending global food crisis. But even under these circumstances, they carefully avoid any mention of the need to ensure an uninterrupted supply of Russian agricultural products to international markets (which is being obstructed by the West’s sanctions). Brussels continues to differentiate between “good” and “bad” food based on whether its origin is “democratic” or not. The EU stubbornly opposes agricultural exports from Crimea. The EU groundlessly refers to export grain grown by the liberated areas of the Donetsk and Lugansk people’s republics as “stolen” and strongly recommends that food-scarce countries not buy it. They are deliberately undermining the preparations for the next sowing campaign both in the republics and the liberated areas of Ukraine.
6. Myth: “[President] Putin is deliberately blocking the wheat supply of the world. At the moment, we have 20 million tonnes of Ukrainian wheat stuck in Ukraine. Ukraine could literally feed the world.”(Source: Speech by President von der Leyen at the GLOBSEC 2022 Bratislava, June2, 2022).
Myth: “When more than 20 million [tonnes] of grain are being blocked in Ukrainian storage [facilities], and someone is preventing this food from reaching the consumers, some will suffer [from] hunger. This is a deliberate attempt to use food as a war weapon. This is a deliberate attempt to create hunger in the world, in order to put pressure on the world, and on the European Union, and on Ukraine.”(Source: Foreign Affairs Council: Remarks by High Representative Josep Borrell at a June 20, 2022 press conference.)
Myth: “Russia is weaponising food supplies, stealing grain, blocking ports and turning Ukrainian farmlands into battlefields. This affects many countries, especially in Africa, risking famine, and political and social instability.” (Source: Invitation letter by President Charles Michel to the members of the European Council prior to their meeting on June 23 and 24, 2022).
Myth: “Russia, by weaponising food in its war against Ukraine, is solely responsible for the global food security crisis it has provoked.”(Source: Conclusions by the European Council, June 23-24, 2022).
Fact: First, we need to look accurately at the volume of export-ready Ukrainian grain and its importance to global food security. According to UN statistics, 800 million tonnes of grain is produced annually around the world. Thus, the estimated 20 million tonnes of Ukrainian grain cannot radically resolve the problem by definition.
In reality, our estimates (shared even by US analysts) show that Ukraine has much less grain, specifically about 7 million tonnes of corn and some 5 million tonnes of wheat (the official US figure is 6 million tons, or so).
According to the European Commission’s food security report of March 23, 2022, the EU is still dependent on forage crop imports, mostly corn. The European Parliament’s research service pointed out in April 2022 that the EU accounted for over 50 percent of Ukraine’s corn exports. A comparison of these facts leads to the conclusion that, while shouting from the roof tops about the urgent need to save Ukrainian cereals, the EU is primarily concerned with its own food security.
As for the allegations that Russia is obstructing grain exports from Ukraine, we resolutely reject these claims. Russia has never blocked grain exports from Ukraine’s Black Sea ports. On the contrary, we are doing our best to provide two humanitarian maritime corridors in the Black Sea and the Sea of Azov, including in order to help Ukraine with its possible Ukrainian grain shipping.
The problem is the high mine hazard and Kiev’s threats to fire at ships. This makes safe navigation in its territorial waters impossible. Ukraine has installed about 420 anchored mines in the Black Sea and the Sea of Azov. Bynow, the Russian Black Sea Fleet has fully demined the ports of Mariupol and Berdyansk, but it is still dangerous to sail in the Black Sea, where a number of Ukrainian mines are adrift, including in the Bosporus area and in the coastal waters of some Black Sea states such as Romania and Turkey. As for obstructing shipping, Kiev has immobilised 70 foreign vessels from 16 countries in seaports under its control (Nikolayev, Odessa, Ochakov, Chernomorsky, and Yuzhny). Every day, the Russian Navy announces 3-mile humanitarian maritime corridors to enable ships to exit safely and export grain.
Russia is ready to contribute to stabilising the global agricultural market. Through the end of the year, we can supply about 30 million tonnes of grain and no less than 22 million tonnes of fertiliser. Russian international grain exports could reach as high as 50 million tonnes eventually.
To stabilise the food security situation, it is necessary to ensure normal logistical, financial and transport conditions for exporting agricultural products and fertilisers from Russia, whose stocks vastly exceed Ukraine’s.
7. Myth: “Russia has put a tax on exports. People complain about high prices. If you put a tax on exports, the prices will go up. Who put the tax on exports? Russia, not us.”(Source: Foreign Affairs Council: Remarks by High Representative Josep Borrell at a June 20, 2022 press conference).
Fact: Introducing export duties or export quotas on some commodities is a forced measure designed to protect the domestic market from price fluctuations and to stabilise prices. The food and energy crisis caused by the West’s selfish policies hasforced many countries to take this path. According to UN statistics, 63 countries have introduced restrictions on agricultural products or fertilisers. The Russian Government introduced export duties on cereals in early 2021 and allocated quotas for grain exports as early as 2020. This has nothing to do with the Ukrainian crisis. Moreover, Russian grain exports sell at world market prices. These are the elementary economic principles, of which the EU seems to be unaware. Another explanation is that they think it is possible to disregard them in the context of their anti-Russia propaganda campaign.
Export duties are mostly aimed at stabilising domestic market prices. There is no lack of demand for grain on the international market. The Russian Government uses the revenues yielded by export duties to expand production infrastructure. This helps boost agricultural exports and stabilise the international food market, which has been shattered by the West’s policies.
8. Myth: “Maybe – then we have to study it – the sanctions against Belarus taken before the war on the export of potash, can affect the dissemination of this product around the world. But our sanctions are not responsible for the food and fertiliser trade in the world, because we only take decisions that affect the European Union Member States, not third countries.” (Source: Foreign Affairs Council: Remarks by High Representative Josep Borrell at a June 20, 2022 press conference).
Fact: So much uncertainty displayed by a top-ranking European bureaucrat in so sensitive an issue should put both European taxpayers and the EU’s partners in third countries on guard. The ban on EU potassium imports from Belarus is basically no different than the same restrictions imposed on Russia (potassium and combined fertiliser). Neither are the consequences of these decisions.
“Sanctions that affect the EU countries alone” proved enough to generate elements of total unpredictability in our foreign partners’ behavior towards Russian companies that are even formally unaffected by the restrictions. The general deterioration in the conditions of interaction with European financial institutions, including lending and insurance organisations, obstacles to payments and other operations put up by European banks, including outside the EU, ungrounded demands of urgent loan repayment, insurance ranking reductions, suppliers’ refusal to grant a stay on payments for supplied goods or services because of the lack of bank guarantees, and more is now part of the routine.
(To be continued)