Ukraine’s reliance on alternative European Union (EU) routes for its grain exports has increased after Russia terminated a year-long agreement allowing safe shipment through its Black Sea ports. As a result, the EU is struggling to strike a balance between assisting Ukraine and satisfying the demand of five eastern EU member states to protect their own markets by extending a ban on domestic sales of Ukrainian grain until the end of 2023. The current deal, which covered protection for farmers in Bulgaria, Hungary, Poland, Romania, and Slovakia, will expire on September 15.
Russian attacks on Ukraine’s inland port infrastructure along the river Danube, its last waterborne export route, since the collapse of the Black Sea agreement have further pressured the EU to permit proximity grain sales once again. The following provides details on the impact of the temporary ban in the five Central and Eastern European (CEE) states on Ukrainian grain sales and transit to other destinations.
The rise of Ukrainian grain inflows in CEE can be attributed to its exemption from EU customs duties, making it cheaper than locally-produced grain. Its proximity to the region and high logistics costs led to an unprecedented surge in grain exports to the five states in 2022 and early 2023, causing disruptions in sales, displacing regional crops from domestic and export markets, depressing prices, and sparking farmers’ protests. In Poland, grain imports increased nearly three-fold in 2022, with 75% being Ukrainian grain, predominantly corn and wheat. Romania, a major EU grain exporter, saw 3.2 million tonnes of Ukrainian grain and oilseeds remain within its borders by May. Hungary’s grain and oilseed imports from Ukraine spiked to 2.5 million tonnes in 2022, falling to 300,000 tonnes in 2023 after the import ban. Slovakia witnessed a ten-fold increase in Ukrainian grain imports in the second half of 2022, reaching 339,000 tonnes.
After the ban was implemented, Poland and Hungary unilaterally closed their borders to Ukrainian grain and other food imports, while Romania sealed transports. The EU subsequently allowed transit through these states, permitting the ban on domestic sales of Ukrainian wheat, maize, and oilseeds till September 15. The transit of wheat via Poland and corn increased substantially in June compared to the first quarter of this year. Romania facilitated a significant proportion of Ukraine’s grain exports through its Black Sea port of Constanta.
The five CEE states have requested an extension of the ban till the end of the year, and the European Commission will review this in early September. Lithuania has also requested the development of a route for Ukrainian grain through Baltic ports with a combined grain export capacity of 25 million tonnes. However, the economic viability of alternative land routes, known as “Solidarity Lanes,” will be a crucial factor. Ukraine estimates that the EU transit route incurs an additional cost of $30-40 per tonne compared to transiting via Poland’s land route, which is €37 more expensive per tonne than using Romania’s Constanta port.
(Reporting by Marek Strzelecki and Luiza Ilie; Additional reporting by Gergerly Szakacs in Budapest and Jason Hovet in Prague; Editing by Gareth Jones)
Credit: The Star : News Feed
