EU Weighs Tariffs on Russian Grain Amidst Ukrainian Conflict
Lara Inglis-Jones | 30 April 2024
Summary
Since the conflict began in Ukraine, global supply chains have faced disruptions in fuel and food due to sanctions, yet Russian grain exports surged.EU calls for tariffs on Russian grain to mitigate market and farmer risks.
Though tariffs oppose Russia, their impact is minimal as Russian grain exports to the EU constitute only one per cent of the total market.
The EU is expected to impose tariffs on Russian and Belarusian grain imports due to pressure from farmers and member countries, with little impact on military operations and ongoing concerns about the surplus of Ukrainian grain in the market.
Since the beginning of Russia's conflict in Ukraine, the global community has dealt with supply disruptions in fuel and food as sanctions and tariffs targeted one of the world's largest suppliers of these essential commodities. Despite this upheaval, Russian grain exports have remained largely unaffected, witnessing a notable surge from 960,000 tonnes in 2022 to 1.5 million tonnes in 2023. Concurrently, production soared from 35 million to 50 million tonnes between 2022 and 2023, propelled by favourable weather conditions. Russia's record-breaking wheat harvest over the past two years, coupled with competitive pricing on the international market, has driven grain prices down to pre-war levels, prompting countries like Spain, Italy, and France to capitalize on the affordability of Russian produce.
Nevertheless, calls have emerged within EU member states and agricultural sectors to impose tariffs on Russian and Belarusian grain exports. In February, Latvia enacted a ban on Russian food exports, and more recently, Polish farmers have staged protests against the influx of cheaper imports from Ukraine and Russia. Consequently, the European Union (EU) is considering implementing tariffs of up to 50 per cent on imports of Russian grain. European Commission President Ursula von der Leyen has stated that these tariffs aim to "mitigate the growing risk to our markets and our farmers" and "diminish Russia's capacity to exploit the EU for the benefit of its military endeavours." The tariff would apply to imports of cereals, oilseeds, and related products originating from Russia and Belarus. According to an EU press release, "the proposed tariffs... are expected to incentivize Russia to redirect exports to non-EU destination markets, including developing countries."
While signalling opposition to Russia, these tariffs are unlikely to affect the country significantly. Russia's annual grain exports to the EU, totalling five million tonnes, represent only around one per cent of the EU's total grain market. Furthermore, these tariffs will unlikely impact upon Vladimir Putin's military actions in Russia.
Additionally, farmers in countries like France and Poland will likely persist in their protests. They are primarily concerned about the surplus of Ukrainian grain flooding the EU market, facilitated by lifting EU trade restrictions on Ukraine at the beginning of the war.
Chad Davis/Flickr
Forecast
Short-term
The European Union (EU) is expected to face increasing pressure from farmers and member countries to impose tariffs on grain imports from Russia and Belarus. Consequently, the EU will likely proceed with implementing tariffs on imports from Russia.
Medium-term
These tariffs will likely have minimal impact on Russia's grain exports and its ongoing military operations. Many countries, such as Brazil, South Africa, and India, are anticipated to maintain normal trade relations with Russia.
Long-term
EU farmers are expected to continue expressing concerns about the surplus of Ukrainian grain in the EU market, a situation facilitated by the lifting of EU trade restrictions on Ukraine at the onset of the conflict.