INTERVIEW: EU tariff of 30%-40% needed on Russian fertilizers for food security: director general

The Director General of Fertilisers Europe, Antoine Hoxha, is in favor of tariffs of 30%-40% on Russian fertilizer imports into the EU on security grounds to support domestic production, the industry association leader told S&P Global Commodity Insights in an interview on Jan. 15.

European farmers "are becoming dependent on Russian fertilizers," he said. "Strictly from a European food security perspective, we have to realize that fertilizer really is strategic because food is strategic."

The EU currently imposes a 6.5% duty on urea imports and a 5.5% duty on ammonia imports from Russia.

Russian imports tend to be lower-priced thanks to cheaper energy costs than those faced by European producers. Hoxha said tariffs would aim to bolster European fertilizer production against such competition to ensure strategic autonomy.

"The primary goal is to have European plants re-start or increase [production] to their nominal capacity," Hoxha said.

Germany's largest urea producer, SKW Piesteritz, cited the supply of cheap Russian alternatives as a factor in its decision to close one of its two ammonia plants indefinitely on Jan. 13. Hoxha, however, sees the temporary measure as a lesser version of "the real problem" that could arise from the overseas competition: a permanent plant closure. "We need to keep enough local European production capacity," he said. "If things go really wrong, we should be able to have our own production."

From Russian gas to Russian urea

While the EU's share of urea imports from Russia is roughly on par with the average of about 28% seen over the past decade, the volume of imports is at a 20-year high according to data from S&P Global's Global Trade Atlas. From January-November, the EU brought in just over 1.53 million mt of the nitrogen fertilizer from Russia. The last time the trading bloc exceeded such levels was in 2004.

The upswing in EU-Russia urea trade volumes comes as the continent reduces its reliance on Russian gas exports amid the war in Ukraine. From Q1 2021 to Q3 2024, the EU saw a 54% decline in the volume of natural gas it imported from Russia, according to Eurostat. Russia is "switching from gas [exports] to urea -- that is a form of gas," Hoxha said.

Russian fertilizers are not restricted under the sanctions regime that has gradually expanded since Russia's invasion of Ukraine in March 2022. Hoxha said he thinks sanctions cutting off the flow of Russian exports to the EU are "probably not possible" politically. Still, he thinks the three years since Russia invaded Ukraine have shown the EU can manage with other fertilizer trade restrictions.

When the war began, Hoxha said, it was unclear whether global supply chains could compensate for reduced Russian fertilizer flows to Europe. "We didn't know if the rest of the world would have the capacity to bring in fertilizers, if needed, for the farmers," he noted. "Now we know that fertilizer, if needed, can come. So today the system has been proven. I can very confidently say even if tomorrow the fertilizer from Russia [into Europe] goes to zero, the rest of the world has the capacity to supply."

Cultivating EU competitiveness

Much of the European fertilizer industry's competitiveness on the global stage will depend on the continent's energy costs. Hoxha is optimistic that plans for increased European LNG import terminals will help stabilize gas costs. "This is absolutely crucial," he said.

Hoxha also points to the EU's decarbonization efforts as a challenge for producers. While he agreed with the importance of the trading bloc's goal to reach net zero carbon emissions by 2050, he explained that it should be open to a range of approaches, including the use of wind, solar, and nuclear energy, as well as carbon capture and storage.

"If we let all technologies compete with one goal -- bring down CO2 emissions -- we will be much more cost-efficient, and we will decarbonize much faster," he said.

At the same time, Hoxha acknowledged the challenges net-zero production may pose for downstream demand. "Decarbonised products are and will be more expensive," he said.

One tool the EU has crafted to mitigate the impact of cheaper, more carbon-intensive imports is the carbon border adjustment mechanism (CBAM). Beginning in 2026, under CBAM, importers will have to purchase certificates covering the cost of carbon embedded in fertilizers brought into the bloc from other countries that price carbon less severely than the EU.

Hoxha supports CBAM's aim to level the playing field and impose the same costs of failing to decarbonize on overseas producers as those faced by European producers. However, he sees "one big problem." Currently, European producers receive free allowances for a set amount of carbon emissions. These free allowances will be gradually reduced to zero from 2026-2034. Hoxha said free allowances should instead be frozen at their current levels or be reduced at a slower rate than currently planned "unless another solution is found for exports." Otherwise, he warned, European exports would become "totally uncompetitive" on the global market.

"We are in favor of CBAM, but CBAM has to be fixed," Hoxha said. "As it is now, it will be a problem if it's not changed."