The European Commission will not be able to help Ukraine cover additional transportation costs associated with grain exports – Reuters

The European Commission has no money and no clear vision of how to help Ukraine finance the additional transportation costs of grain exports after the collapse of the Black Sea grain deal, Reuters reports.

Ukraine, one of the world’s largest grain exporters, will now have to rely almost entirely on expensive routes through the European Union, and the cheapest alternative route, the Danube River, may not be able to increase volumes after Russian shelling.

As a result, the International Monetary Fund has estimated a 10-15% increase in world grain prices.

In a letter dated July 21, which was seen by the agency, the Ministry of Agriculture of Ukraine appealed to the European Commissioner for Trade Valdis Dombrovskis to provide financial assistance to cover additional transportation costs associated with the use of the “solidarity routes”. Ukraine estimates these costs at $30-40 per ton.

This week, EU Agriculture Commissioner Janusz Wojciechowski said that Russia could have benefited if the EU had not helped cut costs.

The agency’s sources note that Europe has not yet found a solution to support grain transportation. “People have been racking their brains since last year,” the source said, adding that “a lot of efforts have already been made to simplify the system.”

The letter also contained a request to increase the capacity of the “solidarity routes” by 1-1.5 million tons per month through “green corridors,” in particular, to the Adriatic Sea, the Baltic States, Germany, and the Netherlands. By the way, thanks to the agreement, Ukraine has transported 60% of its exports via the Solidarity Route and 40% via the Black Sea over the past year.

One diplomatic source said that there is very little money, and significant amounts can only be received after the mid-term budget revision, which may take several more months to agree on.

A European Commission spokesperson confirmed receipt of the letter and said that “we are currently considering such requests and will respond in due course.”

One of the issues is the temporary ban on imports of Ukrainian grain to five neighboring EU countries, which insist on extending the deadline beyond September 15. Poland is strongly opposed to allowing Ukrainian grain to enter its market and has said it is looking for a flexible arrangement on the ban.

According to a second diplomatic source, resistance is also growing because some states do not see the point in paying additional transportation costs due to the ban.

Lithuania has proposed using the Baltic Corridor, but it requires two changes in track gauge, which further increases costs.

In total, between May 2022 and June this year, about 45.5 million tons of Ukrainian agricultural exports were transported through the EU and Moldova, including 41 million tons of grain.

Tags: Ukraine, subsidies, EU, logistics