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Trade Trends News
28-07-2023
Last week, Russia suspended its participation in the Black Sea Grain Initiative, a UN-backed deal that has facilitated the safe passage of 32 million tons of Ukrainian grain through the Black Sea over the past year.
The resulting situation was discussed on Tuesday (July 25) at the monthly meeting of the EU-27 agriculture ministers in Brussels.
For the President of the EU Agriculture Council, Spanish Agriculture Minister Luis Planas, Russia's refusal to extend the Black Sea grain agreement "undoubtedly complicates the market, especially for countries that depend heavily on Ukrainian exports, such as Africa, Asia and Latin America".
However, Janusz Wojciechowski, the EU Commissioner for Agriculture, said that the solution is the Solidarity Corridor - an initiative launched in May 2022 by the EU executive body to create alternative logistical routes for Ukrainian exports using all relevant modes of transport.
"We are ready to export almost everything that Ukraine needs to export through the Solidarity Line," the commissioner said.
Since its launch at the end of May 2023, Ukraine has exported 37.4 million tons of grain, oilseeds and other foodstuffs through the Solidarity Corridor, accounting for 55% of total food exports.
According to data provided by the Council of the European Union, the Solidarity Corridor has also enabled Ukraine to export 37.6 million tons of non-agricultural products and receive humanitarian aid.
According to Wojciechowski, Ukraine's monthly food export needs are expected to be around 4 million tons.
"We have reached this amount in the past," he said. He added that in November 2022, almost 4 million tons of Ukrainian grains and oilseeds were exported through the Solidarity Corridor, which accounted for 60% of Ukrainian exports at that time.
The commissioner also told EU ministers that the EU has the logistical capacity to help Ukraine replace the Black Sea route. "There is only one option: to use the Solidarity Corridor," he said.
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EU funds to cover 'transit' costs
An increase in imports of grain and oilseeds from neighboring Ukraine through the solidarity corridor has raised concerns among European farmers, who have warned that large quantities of grain are stranded at the border, pushing local producers out of the market.
The European Commission has proposed two controversial support schemes to compensate farmers in EU member states bordering Ukraine, including Bulgaria, Hungary, Poland, Romania and Slovakia, to help ease logistical bottlenecks caused by the success of the program.
"Of course, we absolutely need to improve and strengthen the solidarity corridor without disrupting the markets of the frontline states bordering Ukraine and Moldova, which has a very sensitive position," Planas said at a press conference on Tuesday.
On the sidelines of the Council meeting, the Voychekhovsky Commission met with the ministers of the five frontline member states, who raised the issue of additional transit costs, which make goods exported through the Solidarity Corridor unattractive on the global market.
"It is cheaper to buy cereals from Russia than from Ukraine through Polish or Baltic ports," explained the EU's agriculture chief, "because the Solidarity Corridor is more expensive to operate than Russia - and also given that due to the exclusion of food products from the sanctions list out of the sanctions list, agricultural products from Russia do not incur additional costs.
As a result, Wojciechowski is considering some form of public support to cover the extra costs of transporting these goods, and will present a proposal to the other commissioners on how EU funds could cover these costs.
However, nothing is on the table yet. "That's just my position at the moment," he told reporters, adding that there was no deadline for putting forward such a proposal, although it was a pressing issue.
According to EU sources, the financial cost of the proposal could come from the budget of the Commission's transport service (DG MOVE).
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