EU countries increased purchases of Russian grain 10 times

“The scheme is very simple. The two largest Kaliningrad-based companies export grain in transit through Lithuanian ports, request and receive permission to transport grain in transit through Lithuania. The Lithuanian freight forwarder pays taxes for them. Then a Lithuanian company, the buyer of the grain, enters, and the Russian grain enters the port, one of the largest terminals, and successfully goes to third countries. All duties are paid and permits are obtained. And there are many such companies. Lithuanian intermediaries, freight forwarders, carriers, and logistics companies are involved in this scheme.”

According to Mr. Šimas, in 2023, the export of Russian grain through Lithuania increased by 5 mln tons (from 15 mln tons to 21 mln tons).

The situation is similar in Latvia.

In 11 months of last year, the country imported 333,225 tons of grain products from Russia, which is 51.5% more than in the same period of 2022, when 219,959 tons were imported, according to the State Revenue Service (SRS). During 11 months of the last year, 1.975 mln tonnes of grain products were transited from Russia through Latvia, which is 2.3 times more than in the same period of 2022, when 861 068 tonnes of grain were transported through Latvia. This is reported by a local online publication.

The State Revenue Service explained that goods that have been imported or released for free circulation acquire the status of European Union (EU) goods and circulate freely in the EU. They can be consumed in Latvia or transported to another member state without going through customs procedures, including transit.

“There is already a pun among grain exporters that does not do Lithuania and Latvia justice: Kaliningrad has the port of Klaipeda, and central Russia has the ports of Liepaja and Riga,” Karolis Šimas jokes sadly.

“Through the ports of Greater Odesa, the price for farmers has increased by $30. This is due to the fact that freight has risen in price. We have to pay for insurance. The railroad has also risen in price, and transshipment in the port has risen in price. That’s why logistics has become more expensive. But if you export through Romanian ports or alternative routes, it will be even more expensive by $59 or $112,”

Mykola Gorbachev, the head of the association, confirmed that grain transportation costs Ukrainians twice as much as Russians.

“The transportation of corn from Greater Odesa, for example, to Spain now costs 42-44 dollars, wheat will be two dollars different. This amount includes insurance (about $3.3 per ton) and the freight itself,” said Gennadiy Ivanov, director of BPG Shipping.

Meanwhile, for more than six months now, farmers and carriers from neighboring countries have been blocking the borders with Ukraine and demanding that the EU impose restrictions on the import of Ukrainian grain. Is it fair?

“The amount of Ukrainian grain that could pass through Lithuania is a trifle compared to the amount of Russian grain that gets to third countries through the ports of the Baltic states. Yes, grain is a food product, and it is not subject to direct sanctions after Russia’s war in Ukraine, but isn’t that a concern for us?” asks Karolis Šimas.

On February 5, Latvian farmers protested, demanding, among other things, a ban on food imports from Russia and Belarus without a transition period. If the demands are not met, they promised to go to Riga on February 12.

Paul Hughes, Chief Agricultural Economist at S&P Global, suggests that the problem of Russian grain dominance should be solved by market mechanisms. He believes that the biggest problem for Russia will arise if sellers in the EU lower their prices.

“At that point, Russia will have a choice. Firstly, to maintain the minimum level [of export price] and give up the share of exports to the EU, or, secondly, to give up its lower level, reduce the price and maintain the pace of exports,” he told CNN.

He called this scenario a “moment of reckoning.”