What they fought for: Sanctions will leave Europe without a harvest

What they fought for: Sanctions will leave Europe without a harvest

Natalia Dembinskaya

The West is bomba-rding Russia with harsh economic sa-nctions, but retaliatory m-easures will hit the Eur-opean economy no less. The EU runs the risk of being left without gas, fertilizers, wheat and, as a r-esult, without a crop. The result is record high inflation and food shortages.
Inject, but continue
The European Union and the United States continue the economic war against Russia. Unprecedented Western sanctions partially cut off the country from international financial flows. The EU is expanding existing restrictions and threatening new ones. While politicians are trying to get their way, business is afraid of how Russia might respond. First of all, they are afraid to lose “the most expensive” – gas.
This week, blue fuel has already risen in price by 85 percent – up to $2,250 per thousand cubic meters. Although quotes have been prohibitive before. As Bloomberg notes, the conflict in Ukraine has turned markets upside down, the prices of everything from oil to wheat have risen, and the task of curbing inflation is almost impossible: raw materials and energy are a key element in the cost of any commodity.
Traders daily put into quotes the risks of disrupting gas supplies from Russia, the largest seller on the continent. And although the Europeans are shouting that it is necessary to abandon Russian fuel, they are clearly not ready for a sudden “energy independence”: after all, we are talking about 40 percent of gas consumption in the EU.
Left without fertilizer
Already in the autumn in Europe – unaffordable tariffs for electricity. First of all, it hit the chemical industry. Last year, the largest producers Yara, CF Industries, Fertiberia suspended the production of nitrogen fertilizers, sharply inflating their prices on the European market.
According to industry group Fertilizers Europe, 80 percent of the industry’s costs come from gas. The key raw material, ammonia, which is needed for nitrogen fertilizers, has also risen sharply in price. This immediately hit the supply chains. In the UK, for example, there is a shortage of frozen meat due to a lack of dry ice. And the farmers are worried about the harvest. No fertilizer comes from China. Under such conditions, the demand for products from Russia has increased dramatically.
At the same time, dome-stic prices for nitrogen mineral and chemical fertilizers were fixed – three to four times lower than in Europe. So that suppliers would not seek to go to premium markets, the authorities limited exports from December to the end of May.
According to Rosstat, last year the production of mineral fertilizers increased by 5.6 percent, to 24.9 million tons (in the active substance). As follows from the data of the Federal Customs Service and Trade Map, about 65 percent is exported. Almost a quarter – to the European Union and the United States, to China – seven percent.
However, now the Eur-opeans are at risk of losing what they have. The Minis-try of Industry and Trade proposed to suspend deliveries due to the “sabotage” of logistics companies that refused to work with Russian cargo. As a result, farmers in the EU and other countries cannot receive the contracted volumes.
“This creates obvious risks of crop failure and, as a result, food shortages for the countries of Western and Eastern Europe, Latin America, South and Southeast Asia. After all, it is either extremely difficult or even impossible to replace Russian fertilizers today,” the Ministry of Industry and Trade says. It was proposed to suspend exports “until the carriers resume rhythmic work and provide guarantees for the full supply of Russian fertilizers.”
Threaten with disaster
Analysts state: the agriculture of Europe is threatened with a real catastrophe. This sector of the economy is already under the yoke of high prices for agrochemicals.
“If shipments from do-mestic chemical plants st-op, prices will skyrocket and mineral fertilizers will literally be worth their wei-ght in gold, or even platinum or palladium. Europ-ean farmers will not be able to find a full-fledged rep-lacement for Russian products, since the remaining production of nitrogen fertilizers does not provide their needs. With phosphorus – similarly. With potash, the situation is better thanks to the German K + S Gr-oup, however, its capacities are not unlimited, “- points out Leonid Khazanov, an independent industrial expert. There are no alternatives, he says. In Africa, nitrogen and phosphate fertilizers are too scarce. In North America, everything goes to local farmers. As for potash, neither Canad-ian Nutrien nor US Mosaic will be able to quickly ramp up production.
As a result, European farmers will either have to reduce the area under crops or grow crops without mineral fertilizers.
The crisis also heightened concerns about the supply of grains, primarily wheat. For the first time since 2008, its value on the Chicago Stock Exchange is already above $11 per bushel. In the first three days of March, wheat has risen in price by 22.2 percent – stronger than in the whole of February.
Bloomberg states that it’s all about the consequences of large-scale US and European sanctions. The restrictions affected the situation with supplies through the Black Sea. As the agency clarifies, the harvest may be 30-50 percent less than in 2021, food prices will soar. Russia, experts assure, will not be left behind. “A possible suspension of grain exports due to the actions of foreign logistics operators will only lead to its rise in price throughout the world, hitting Europe hard,” Khazanov points out. The competitors will be Egypt, Turkey, Pakistan, Bangladesh and other countries that are ready to pay well for grain from Russia.

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