Economic News (3rd Party)

BUCHAREST/WARSAW (Reuters) – Russia in July pulled out of a year-old agreement to safely export Ukrainian grain through Black Sea ports. Since then, Ukraine has relied entirely on alternative routes through the European Union.

In July, Russia withdrew from a year-old deal that allowed Ukrainian grain to be safely exported through Black Sea ports. Ukraine has since relied entirely on alternative routes through the EU. A person inspects maize on a farm in Timar, northeastern Hungary. FILE PHOTO: April 2023. REUTERS/Bernadett Szabo

In response, the EU headquarters is scrambling to find a balance between aid to Ukraine and the demands of the EU’s five eastern member states. The five eastern countries are calling for the ban on Ukrainian grain imports to be extended until at least the end of 2023 to protect their markets.

The current ban on imports to protect farmers in five neighboring countries of Ukraine – Bulgaria, Hungary, Poland, Romania and Slovakia – is set to expire on September 15.

Weeks after withdrawing from the Black Sea grain deal, Russia continues to attack inland port infrastructure along the Danube, the last remaining shipping route for Ukraine’s exports. The EU is under increasing pressure to resume grain exports to its neighbors.

Let’s take a closer look at how the temporary import bans in five Central and Eastern European countries are affecting Ukrainian grain exports and their shipments to other destinations.

◎Reasons for the increased inflow of Ukrainian grains to Central and Eastern European countries

Ukrainian grains are exempt from EU tariffs and are cheaper than domestic grains in other countries.

In 2022 and early 2023, Ukrainian grain exports to five neighboring countries showed an unprecedented increase, partly due to rising logistics costs. This has disrupted sales of grains produced in the five countries, forced them out of the domestic market and some export markets, driving down prices and triggering protests from farmers in each country.

Poland’s grain imports nearly tripled in 2022 to 3.27 million tonnes, of which 75% were Ukrainian grains, mainly maize and wheat. Massive imports continued until March 2023.

Romania, naturally one of the EU’s leading grain exporters, had 3.2 million tonnes of Ukrainian grains and oilseeds in the country as of May, according to the country’s agriculture ministry. Grain imports before the invasion of Ukraine were negligible.

Cesar Gheorghe of Romanian grain market consultancy Agricorum estimates Ukrainian grain sales at around 4.7 million tonnes, with imports masquerading as existing contracts continuing even after the import ban comes into effect. point out.

Hungary imported up to 50,000 tonnes of grain and oilseeds annually from Ukraine before the war, but that surged to 2.5 million tonnes in 2022 and up to 300,000 tonnes until the import ban is implemented in 2023. tons imported.

Slovakia increased imports of Ukrainian grain to 339,000 tonnes in the second half of 2022, according to official figures. This is about 10 times higher than in the first half of the same year.

◎ Situation after import ban

In April, Poland and Hungary unilaterally banned imports of Ukrainian grains and other foodstuffs. Romania, Ukraine’s largest alternative export route, passed the import ban, but decided to keep the shipment inside the country sealed.

In May, the EU decided to start domestic sales of Ukrainian wheat, maize and oilseeds to Poland, Romania, Hungary, Slovakia, which all border Ukraine, and Bulgaria, which lies south of the Danube River, until June 5. Although the ban was approved (later extended until September 15), exports via these countries were to continue.

After the ban came into force, transit volumes in the five countries surged. Ukrainian wheat shipped to other countries via Poland jumped from 43,000-51,000 tonnes per month in the first quarter of this year to more than 90,000 tonnes in June. Maize throughput increased to 170,000 tonnes in June, from about 50,000 to 70,000 tonnes per month in the first quarter of this year, according to the Polish Ministry of Agriculture.

Since the start of the war, a third of Ukrainian grain exports have been shipped from Romania’s Black Sea port of Constanta. That amount was 8.6 million tons in 2022 and 7.5 million tons in the first half of this year.

In May and June, there was an increase in the volume transported through the Danube from Ukrainian river ports in particular.

◎ How will the EU headquarters respond to the request for the extension of the import ban?

On July 19, the five countries requested an extension of the import ban until at least the end of this year. The EU headquarters plans to review the import ban in early September, taking into consideration this year’s crop conditions, storage capacity, and grain availability in third countries.

Poland, which is due to hold general elections in October or November, has said it has no intention of lifting a ban on Ukrainian grain imports on September 15, and has asked the EU headquarters to extend the protection measures. increasing pressure.

Meanwhile, Lithuania has asked the EU’s executive body, the European Commission, to open up export routes for Ukrainian grain through ports on the Baltic coast. Combined, five ports in Lithuania, Latvia and Estonia have a grain export capacity of 25 million tons.

The key is whether the overland route, known as the “lane of solidarity,” is economically viable.

Ukraine estimates an additional cost of $30 to $40 per tonne on the EU route. According to Viorel Panayt, manager of Comvex, which operates the port of Constanta in Romania, it costs 37 euros (about 5,800 yen) per tonne to export overland via Poland compared to exporting via the port. ) would require an additional cost.

(Luiza Ilie, Marek Strzelecki, translation: Erklelen)

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2023-08-11 22:14:00