EU has no easy options to help Ukraine shift its grain

Pressure is mounting on the EU to move even more of Ukraine’s stranded agricultural surplus after Moscow refused to rejoin a U.N.-backed deal to allow Kyiv to export grain across the Black Sea and unleashed a wave of attacks on Ukrainian seaports.

Brussels says the EU is perfectly capable of exporting all of the grain and other agricultural products backed up in Ukraine as a result of Russia’s 17-month-old war of aggression and decision last week to terminate the Black Sea Grain Initiative.

“We are ready to export by solidarity lanes almost everything that Ukraine needs to export,” EU Agriculture Commissioner Janusz Wojciechowski said on the sidelines of a meeting of EU agriculture ministers in Brussels this week.

Despite that confident statement, the EU’s solidarity lanes — overland corridors set up to facilitate transit by road, rail and inland waterway — are under strain. The bloc has struggled to boost their capacity and faces pushback from eastern member countries that ended up getting stuck with a Ukrainian supply glut.

The most promising route — via the Danube estuary — is in jeopardy after Russian air strikes earlier this week on the Ukrainian riverport of Reni, just a few hundred meters from the border with Romania, which is both a member of the EU and of NATO.

Responding, NATO Secretary General Jens Stoltenberg condemned Russia’s “dangerous and escalatory actions” and called on Moscow to stop “weaponizing hunger” — comments echoed by Romanian President Klaus Iohannis.

The European Commission estimates, based on Ukrainian data, that more than 65 percent of the grain that was exported via the solidarity lanes traveled in June along the Danube corridor. From the Ukrainian riverports of Reni and Izmail, Giurgiulesti in Moldova and Galați in Romania, cargoes can reach the Black Sea either via the Sulina Channel or the Romanian Black Sea hub of Constanța.

Some argue the EU should be bolstering alternative routes.

Lithuania has proposed increasing Ukrainian grain exports through Poland to its Baltic port of Klaipėda and four other ports in Estonia and Latvia. Together, the five ports are capable of handling 25 million metric tons of grain a year, Vilnius said in a letter to the European Commission, seen by POLITICO.

The plan hinges on so-called “green corridors” that would move customs controls, phytosanitary and veterinary checks away from the Polish-Ukrainian border.

Ukraine has come out in favor of the approach, with Agriculture Minister Mykola Solskyi backing Vilnius’ proposal in a letter to EU Trade Commissioner Valdis Dombrovskis — but in addition to the Baltic ports, he specifically mentioned Hamburg and Rostock in Germany, Rotterdam in the Netherlands, Rijeka in Croatia, Trieste in Italy, and the Slovenian port of Koper.

As long as a hostile Russian navy controls the Black Sea, traversing EU territory will remain the most reliable way for Ukraine to export its goods.

The solidarity lanes have accommodated an increasing share of Ukraine’s grain exports: Between May 2022 and June 2023, 41 million tons of Ukraine’s grain exports passed along the corridors, while 32 million tons were exported via the now-defunct Black Sea grain deal, Commission spokesperson Adalbert Jahnz said.

But transporting grain from Ukraine by rail and road is expensive and inefficient, making the country’s produce — its main export and a vital economic lifeline — less competitive on the world market. It also requires investment in infrastructure, not least to accommodate increased traffic and the different rail gauges used in the EU and Ukraine.

Even as Ukraine defended alternative transit routes to EU ports, it admitted that those routes are “little used due to the complexity and cost of logistics in comparison with other routes,” estimating the cost gap at €30 to €40 per ton.

Both Lithuania and Ukraine have asked for subsidies to make up the difference.

Countries like Poland, Hungary and Romania, through which the grain would still have to pass, agree in principle with the proposals — but don’t want to bear the costs alone.

“The idea is great, but who’s going to pay for the transportation?” a diplomat from an eastern EU country told POLITICO of the Lithuanian proposal. The diplomat was granted anonymity as they were not authorized to speak on the record.

Romania has expanded Constanța’s capacity to accommodate the increased traffic, while Poland has invested some €100 million in projects to increase its rail capacity and create a new border crossing with Ukraine.

The total investment needed to realize the full potential of the solidarity lanes, however, is estimated at billions of euros.

All eyes are on Brussels — but Commission officials have repeatedly warned that the EU’s infrastructure budget is underfunded. Having already earmarked €250 million for specific solidarity lane projects and announced €1 billion in joint funding, the EU’s coffers are running dry.

Even if the money can be found, however, the solidarity lanes have already come at a high political price.

Following Russia’s invasion last year, the widespread dumping of Ukrainian grain on Polish markets angered local farmers, and the presence of thousands of Ukrainian truckers has strained local transport companies there and in Romania.

In June, the European Commission extended a ban on Ukrainian grain exports to the two countries, along with Bulgaria, Hungary and Slovakia, until at least September 15. Ukrainian grain can be imported into the EU, but only if none of it gets stuck in any of the five countries.

Led by Poland, the five countries argue that the restrictions should be extended at least until the end of the year. The restrictions, they say, have allowed Ukrainian grain to flow freely to other destinations.

“Since the European Commission imposed the ban, transit through Poland has more than even doubled,” Polish Agriculture Minister Robert Telus said during this week’s meeting in Brussels. “We are willing to further assist in this transit.”

Ukraine sees things differently, suggesting that Polish authorities may be deliberately slowing checks at the border. Shipments crossing the border fell to just 336,000 tons in May, less than half the amount reported last November, one government official said.

Tags: EU, Black Sea, U.N., Danube, Black Sea Grain Initiative, Sulina Channel, Ukraine, Russia, export, grain, Romania