Master of Double Standards
Berlin accuses Moscow for suspending the grain deal, but ignores impact of anti-Russia sanctions on the Global South regarding grain, fertilizer and natural gas supplies.
BERLIN/MOSCOW (Own report) – The German government is making serious accusations against Russia for suspending the grain deal with Ukraine. The fact that, since the beginning of the week, Moscow has pulled out of the deal that allowed Ukraine to export grain via the Black Sea, shows that President Vladimir Putin is “again using hunger as a weapon against the whole world,” German Foreign Minister declared on Monday. The absence of grain deliveries from Ukraine – just like the war-related slump in Ukraine’s harvest – is an additional danger for the already precarious food supply, particularly to poorer countries. This, however, also applies to Western sanctions, which impede Russian grain and fertilizer exports – to the detriment of the Global South. While the EU is perfectly capable of facilitating Russian exports to satisfy its own needs – such as nuclear fuel and nickel – it refrains from enabling those Russian exports that are urgently needed in poorer countries. Depriving themselves from Russian pipeline gas in their sanctions frenzy last year, EU states bought up LNG away from countries such as Pakistan, thereby driving them into more severe crises.
Ukrainian Grain
The direct impact of the Ukraine war on the global grain supplies has become apparent. All sorts of war damage – from the destruction of infrastructure to the mining of farmland, to the lack of workers, who have perished at the front or have fled – and territorial losses have severely affected Ukraine’s harvest. According to experts, the harvest this year could plummet by as much as 50% compared to the record pre-war harvest in 2021. Ukraine grains exports (corn + wheat) might be 27-30mmt, down 15-18mmt from 2021/22.[1] On a longer term, the resulting gap in the global market could be filled with grain exports from North and South America, an expert at Citi Research assumes.[2] The fact that Moscow had suspended the grain deal on Monday could widen the gap in the short term. Grain prices, which have briefly soared at the beginning of the week, have dropped again to the level of previous weeks – also due to the fact that, since some time, Brazil has increased its output.[3] Nevertheless, the suspension of the deal adds new strain at a time that is already difficult.
Russian Fertilizer
The latter applies equally to the fact that Western sanctions on Russia continue to block Russian exports of grain and fertilizer. The West has removed both from their list of sanctions, however, the delivery remains obstructed by sanctions against Russia’s financial and transportation sectors. Theoretically, grain and fertilizer may be delivered, but can be neither transported nor paid for. In practice, the special regulations agreed on last year do not function. According to Russian estimates, this would also pertain to the new special offer that the EU has recently proposed. As a result, last year, Russian fertilizer exports had slumped by ten percent during the first ten months of 2022.[4] The sharp rise in price, caused by that slump, has boosted Russia’s returns during the same period by 70 percent, weighing heavily on the Global South. Even though the prices have again somewhat fallen, they still remain far above the long-term average prior to 2021. This has consequences. According to a study carried out at the University of Edinburgh, surging energy and fertiliser prices have a much greater impact on the price of grain than the temporary effect of export restrictions, such as the suspension of the grain deal.[5]
With Double Standards
The fact that Western states persistently refuse to lift the particular sanctions on Russia that are blocking the grain and fertilizer exports is also being criticized In the Global South. In fact, the EU is quite capable of ensuring Russian deliveries and a certain amount of cooperation, there, where it serves its own needs. For example, civilian nuclear cooperation between companies in Russia and in the EU have been exempted from sanctions and continue their cooperation without hindrance. Nickel is also still being imported from Russia. “Neither Nornickel nor its main stockholder Vladimir Potanin have been placed under EU sanctions, because Russian nickel supplies cannot currently be replaced,” admitted the government’s foreign business agency Germany Trade and Invest (gtai).[6] Russian oil is still being delivered to some of the eastern EU member countries via the Druzhba pipeline, even though the pipeline transits Ukrainian territory. Kiev receives fees from Moscow. Ukraine, on the other hand, has shut down the Togliatti pipeline delivering Russian ammonia to Odessa, to supply the global fertilizer market. The EU is not interested in this pipeline, although shutting it down poses serious problems for the Global South. Russia’s lack of delivery of fertilizer to the Global South is also of no interest to the EU.
LNG Competition
EU countries are also indifferent to the impact that their gas boycott has on the nations of the Global South. This impact becomes apparent in recent statistics. They show that the EU countries’ halt of their Russian pipeline gas supply, led to a substantial increase in LNG imports. Last year, Germany was initially still primarily dependent on LNG imports from Belgium and France. Then, still in December, it could commission its first LNG terminal in Wilhelmshaven. This achievement was very proudly celebrated as the newly found independence from Russian gas supply. As current statistics of the US Energy Information Administration (EIA) demonstrate, German and other EU countries’ efforts have led to a composite increase in LNG imports to the continent by an impressive 65 percent.[7] Around the world, LNG exports also increased last year, however the global increase of about five percent did not, of course, suffice to cover the skyrocketing European needs. This then led to the prosperous countries of Europe entering in fierce purchasing competition against poorer countries, with the latter being defeated and forced to sharply curb their imports. Several Asian nations found themselves above all in this category.
Bought from the Market
Europe’s switch to LNG, announced with such great satisfaction, hit particularly hard the southern Asian countries. India, Pakistan, and Bangladesh, together, lost around 18 percent of their LNG imports. Late last week, it was announced that Pakistan has received an offer on the spot market for an LNG supply for the first time in over a year.[8] This had been previously hampered by the fact that European countries had bought the market dry of all available supplies. Even contractually assured imports were no longer available. Italy’s ENI group had a contract with Pakistan to regularly deliver LNG from 2017 to 2032. Because natural gas prices skyrocketed last year, ENI quite often broke its contract with Islamabad to sell its LNG to Europe, rather than to Pakistan, which was more profitable, because the contractual penalty was well below the prices attained in Europe. According to reports, with these transactions, ENI earned about US $550 million,[9] while Pakistan had to temporarily shut down factories and strictly restrain private consumption, due to a lack of gas shortages. (german-foreign-policy.com reported.[10]) There is no discussion in Europe pertaining to whether it is appropriate to rob other countries of their energy sources in the frenzy of sanctions against Russia.
[1], [2] Lucy Handley: Ukraine’s corn and wheat exports are set to plummet. Here’s what that means for the world’s food supply. cnbc.com 20.04.2023.
[3] Laurin-Whitney Gottbrath: What Russia’s withdrawal from the grain deal means for the world. axios.com 18.07.2023.
[4] Shiba Teramoto: Russia Sees 70% Boost in Fertilizer Export Revenues Amid Price Increase in 2022. chemanalyst.com 13.02.2023.
[5] Peter Alexander: Further food price rises could cause up to 1 million additional deaths in 2023. theconversation.com 07.02.2023.
[6] Hans-Jürgen Wittmann: Europa kann Metallimporte aus Russland noch nicht völlig ersetzen. gtai.de 23.05.2023.
[7] Global liquefied natural gas trade volumes set a new record in 2022. eia.gov 05.07.2023.
[8] Ahmad Ahmadani: After year of failed attempts, Trafigura offers LNG shipment to Pakistan. pakistantoday.com.pk 14.07.2023.
[9] Italian power giant Eni earned $550mn by reneging on Pakistan LNG supply: report. brecorder.com 29.04.2023.
[10] See also After us the Deluge.
