Column by Anatoly Kostyrev about barriers to Russian grain

The EU’s readiness to introduce duties on grain imports from the Russian Federation and Belarus at €95 per ton and to set 50% duties on oilseeds and their products, as reported by the Financial Times and Reuters, citing sources, caused a restrained reaction in Russia. The Union of Grain Exporters noted that the EU is rather a competitor of the Russian Federation in the world market, the export of mass grain crops from the country to Europe was of a situational nature and these volumes can be quite simply reoriented to the “more promising” markets of the Middle East and Africa.

The union believes that the measure will be unpleasant for some European processors – primarily in Italy and Spain. Italy was the main importer of Russian durum wheat, but the Russian government has already limited the export of this crop until May 31, 2024, to ensure the country’s food security.

According to experts, the EU actually accounts for only 2.4% of Russian grain exports this season. But, my interlocutors remind us, a significant share of Russian flax, as well as sunflower and rapeseed meal, is supplied to the EU. It is possible to find other buyers for these goods, although they will certainly take advantage of the situation and dictate prices.

News about a possible restriction of Russian food supplies to the EU on Tuesday led to an increase in wheat prices on exchanges in Chicago and Paris. This could support world prices for Russian wheat, which would be useful given the huge harvest for the second season in a row.

Meanwhile, there are more reasons for concern than meets the eye. Until recently, the Russian agricultural industry, primarily the markets for grain and processed oilseed products, generally managed to avoid direct sanctions. It seemed that the authorities of Western countries would not risk interfering in global food trade due to high inflation in some countries.

But, apparently, in the context of the spread of sanctions to almost all significant industries, problems with the supply of inexpensive agricultural products from Ukraine, which European farmers are increasingly loudly complaining about, restrictions on domestic food are becoming increasingly likely. And quite serious.

Although, according to Reuters, the EU does not yet plan to limit the transit of Russian grain and oilseeds, there are no guarantees that this will not be the next step. And if at the beginning of hostilities in Ukraine, some participants in the grain market spoke about “hidden sanctions” in the form of problems with payments and freight, restraining exports, then in the future the restrictions may well become obvious.