For Europe, instead of gas, a new “dependence” on Russia: the consequences can be even worse

Europe is slowly moving towards a new dependency. Dependence on Russian gas is being “replaced” with fertilizer, writes the “Financial Times”.

“Fertilizer is the new gas. The paradox is that the goal is to reduce Europe’s dependence on Russia, and now we are blindly handing over the most important food and fertilizer capacities to Russia,” the Financial Times quoted the CEO of Yara International, one of the world’s largest nitrogen gas producers, as saying. Congratulations Thor Holsetter.

During the year until June 2023, the EU imported twice as much urea from Russia than a year earlier, according to “Eurostat” data.

Russian imports in the current season (up to June this year) are smaller, but still historically high and account for a third of the total urea imports in the European Union.

Fertilizer prices rose after Russia’s full-scale invasion of Ukraine in February 2022, as sanctions imposed on Russia limited the availability of natural gas, a key raw material for the production of nitrogen fertilizers such as ammonia and urea.

This has dealt a financial blow to European farmers, while farmers in other countries, especially in Africa, have abandoned fertilizers, leading to crop losses and the development of a global food crisis.

Since then, fertilizer prices have fallen as natural gas prices have fallen, but European industry still faces difficulties as Russian imports take up a large share of the market, Holsetter says.

Russian fertilizer producers benefit from lower energy prices, Holsetter says, adding that 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 fertilizers. This also applies to potash and phosphorus fertilizers, which cannot replace nitrogen fertilizers.

While Western sanctions include exemptions for Russian food and fertilizer exports, Moscow complains that trade is hampered by concerns among buyers, their banks and insurers about the involvement of sanctioned Russian individuals or companies. Despite this, revenues from Russian fertilizer exports increased by 70% in 2022, thanks to rising prices.

Russia can use its dominance in the fertilizer market as political leverage, just as Moscow does in energy supplies, Holsetter said.