Imposed sanctions: Expected consequences of EU's decision to increase tariffs on Russian fertilizer exports
The European Parliament has voted to intensify import tariffs on Russian and Belarusian fertilizers and agricultural products in a bid to diminish their influence on the EU economy. Starting from July 1, 2025, additional fixed duties will be imposed on nitrogen fertilizers, escalating to €40 per tonne in 2025 and €430 per tonne by 2028. For mixed, nitrogen-containing fertilizers, the duties will climb from €45 per tonne in 2025 to €430 per tonne by 2028.
Senior Analyst at "Eiler Analytical Technologies," Nikanor Khalin, remarks that these gradual tariff increases aim to shield the EU economy and provide local importers with ample time to find alternative suppliers. However, he warns that substituting Russian products might take longer than anticipated due to the significant market share they hold in EU imports.
From July 1, 2025, the EU will also add a 50% ad valorem rate to existing tariffs on nearly all types of Russian agricultural products of both animal and plant origin. Prohibitive import tariffs on certain agricultural products, like various grains and oilseeds, were already introduced in July 2024.
Initially proposed by the European Commission in January, this tariff scheme received support from the relevant international trade committee of the European Parliament on May 15. The European Parliament and the Council of the EU must now agree on the final text of the bill before it can be published in the official EU journal and enacted.
The European Fertilizers Association, Fertilizers Europe, has welcomed the decision, with President Leo Alders stating that the importation of Russian fertilizers undermined fair competition and put pressure on local producers. The association calls on all EU institutions to expedite the implementation of the tariffs and ensure their effective enforcement.
On the contrary, the European farmers' association, Copa-Cogeca, has raised concerns about the lack of attention towards alternative supply sources and the insufficient assessment of the impacts of the measures taken. Copa-Cogeca urges European authorities, particularly the European Commission, to closely monitor the market, increase its transparency through regular publication of fertilizer prices in EU member states, and investigate the possibility of creating a risk management tool for the entire fertilizer supply chain.
Andrei Sizov, director of the analytical center "SovEcon," notes that the EU's decision to restrict fertilizer supplies is neither advantageous for farmers nor producers. He suggests that the gradual reduction in competition could lead to increased fertilizer prices for struggling European farmers, while European producers may also be discontented with the progressive increase in duties.
According to Vasily Danilov, leading analyst at investment company "Veles Capital," Russia's substantial share in European imports of nitrogen and mixed fertilizers (3.9 million tons in 2024) warrants the phased cessation of these supplies to the EU market. In the first quarter of 2025, Russia provided 1.3 million tons, accounting for 32% of the total imports of these fertilizers.
Experts believe that European suppliers – Egypt, Algeria, Norway, China, and the US – are likely to strive to boost their market share by filling the gap left by Russian volumes. Supplementing Russian supplies may involve increased imports from Morocco, Egypt, and Algeria, collectively accounting for approximately 35% of all EU fertilizer imports in 2024. Domestic production could also play a significant role in the replacement of Russian volumes, as highlighted by Dmitry Skryabin, portfolio manager of UК "Alpha-Capital."
The EU's move to limit fertilizer supplies is influenced by both political motivations and lobbying from local chemical companies eager to displace their competitors on the European market, according to independent industrial expert Leonid Hazanov. He points out that previously imposed sanctions failed to yield the desired results, and there are limited prospects to exert further pressure on Russia's economy.
Maxim Khudalov, another independent industrial expert, stresses that the new tariffs on Russian agricultural products were driven by two factors: political considerations and the dissatisfaction of European farmers with low prices for their products.
Sizov from "SovEcon" asserts that the most significant aspect of the new European Parliament decision lies in its impact on fertilizers, as Russia's agricultural exports to the EU were minimal even before the tariffs were imposed. European farmers were more concerned about Ukrainian agricultural product supplies, which were higher than Russian supplies, as per independent agricultural market expert Alexander Korbut.
Korbut adds that the only significant products for Russia that have been hit by tariffs are oilseed meal and cake – by-products of oilseed processing used as animal feed. He also mentions that another product that Russia actively exported, flaxseed, was a major buyer for Belgium and Poland but will likely turn to China and Kazakhstan as alternative buyers after the new tariffs come into effect.
Nikanor Khalin, Senior Analyst at "Eiler Analytical Technologies," suggests that the EU may struggle to find alternative suppliers for Russian fertilizers due to their significant market share, despite the gradual increase in import tariffs. Andrej Sizov, director of the analytical center "SovEcon," foresees potential increases in fertilizer prices for European farmers as a result of the reduced competition.
