The US government was thought to be encouraging agricultural and shipping companies, in a quiet and low-key fashion, to buy and carry more Russian fertilizer, reports Bloomberg, citing unnamed people familiar with the efforts.
The US move was part of complex and difficult negotiations underway involving the United Nations that aim boost deliveries of fertilizer, grain and other farm products from Russia and Ukraine.
The EU and the US have built exemptions into their sanctions restrictions on doing business with Russia to allow trade in fertilizer, of which Russia is a key global supplier. However, many shippers, banks and insurers have been “self-sanctioning” for two reasons. One is the safety-first principle of being afraid of breaking the rules by mistake. A second is that the lead times involved mean that shippers need to know not only what is sanctioned today, but also what will be sanctioned in three months’ time.
Russian fertilizer exports were reported to be down 24% this year. This has left the US authorities in the ironic position of looking how to encourage the relevant companies to trade with Russia. For obvious reasons, such encouragement has not been high-profile.
The move by the US emphasizes the paradox of sanctions against Russia – one that Russia has not been slow to highlight – that they harm other countries as well as Russia.
The global economy is heavily dependent on commodity supplies from Russia, so while most countries support the principle of sanctions, they also tend to want exceptions for commodities that they depend on, be that natural gas, oil, fertilizer or grains.
Washington apparently sent a representative to Moscow earlier this month for UN-led talks on supply issues, although it has been impossible to get this confirmed officially.
There are growing fears that inadequate fertilizer deliveries in 2022 could lead to a reduction in yield in 2023, with concomitant knock-on effects for many countries.
Russia, meanwhile has called on the US to provide assurances to buyers, financial backers, insurers and shippers of its fertilizer and grain that they will not be penalized either now or in future for trading in such products.
Total Russian grain exports this season are down only 14%, and wheat exports doubled in May, according to the country’s Grain Union. However, for these goods it is the blockage in Ukraine that is having the greater effect. More than 25m tons of grain, sunflower oil and other commodities remained stuck in Ukraine, unable to leave via the Black Sea and unable to scale up the small amounts leaving via land or through river traffic up the Danube from the Romanian port of Constanta.
Russia has won the tentative support of Turkey in its calls for a means by which goods could leave via the Black Sea, efforts by Turkey to mediate a solution acceptable to Ukraine and the sanctions-imposing West have not yet yielded fruit.
An additional problem is that shipping companies (and their insurers) remain extremely wary of sending vessels into the Black Sea to pick up commodities. Apart from the fears relating to sanctions, there is also the more physical concern that their ship might get blown up.
At a briefing on June 9th, James O’Brien, head of the Office of Sanctions Coordination at the US State Department, said that “we’re working together with our partners to get about half of what Ukraine exports out each month,” but the time factor and the reduction would mean that “we’re looking at a substantial shortfall.”
Source Insurance Marine News, June 15th 2022