The influential sanctions-hit Russian fertiliser billionaire Dmitry Mazepin has called on global commodities traders to unblock a UN-brokered deal to resume shipments of ammonia, the fertiliser ingredient seen as essential for alleviating a global food crisis.
The UN wants exports of Russian ammonia through a Ukrainian pipeline to be resumed in order to ease global fertiliser prices, while EU member states have called for the bloc to make a clearer exemption from sanctions for Russian agriculture exports in general amid escalating food shortages.
Kyiv and western capitals are loath to allow the Russian fertiliser sector to reap substantial export profits at a time when sanctions are supposed to be crippling Russia’s economy, but they are under pressure to protect vulnerable countries from food and fertiliser shortages.
A deal thrashed out by Russia and Ukraine, via the UN, in Istanbul this summer and renewed last month opened the way for exports of Ukrainian grain blockaded by Russia’s invasion. The agreement included a pledge to restart exports of ammonia, a key ingredient in the production of nitrate fertilisers, Mazepin said.
“I asked for help, through diplomatic channels, to once again revisit those agreements that were signed in Istanbul regarding the grain deal to open ammonia,” he said in an interview with the Financial Times, of a November meeting he had with Russian president Vladimir Putin.
Mazepin, founder and former majority owner of major Russian fertiliser producer Uralchem, outlined a proposal for a deal that concerns a pipeline connecting its TogliattiAzot plant to a Ukrainian port.
The plan would involve a US or other non-Russian trading company, he said, “chosen from among the top three or four international traders”, purchasing ammonia in Russia and transporting it across Ukraine to the port of Odesa, where it would be shipped across the Black Sea. Mazepin said exports could start immediately, adding that about 80 per cent of output would head to African countries. “We are ready to resume pumping.”
Mazepin, who chairs the fertiliser committee of Russia’s main oligarch talking shop, is seen as an increasingly influential figure after his meeting with Putin late last month.
Russia’s bombardment of Ukraine’s cities has made it difficult for the country’s negotiators to accept the reopening of a route that could allow Russia to ship millions of tonnes of ammonia — worth about $1,000 per tonne at current prices — each year via Ukraine.
The UN hopes that restoring ammonia volumes, however, will push down global prices. Some African nations have also blamed fertiliser shipment delays on EU sanctions, which do not target agriculture, but have led payment, shipping, and insurance sectors to avoid dealing with Russian suppliers.
EU capitals in a position paper last week urged Brussels to make a clearer exemption from sanctions for Russia’s food and fertiliser exports to ease deliveries to poorer countries. EU member states are debating possible amendments to the sanctions this week, as they attempt to push through a ninth package of penalties on Russia.
Mazepin echoed this call, arguing that though agriculture is supposed to be ringfenced from sanctions, international banks, insurers and other entities along the supply chain were still refusing to work with companies such as Uralchem.
After he was placed under individual sanctions by Brussels in March, Mazepin reduced his stake in Uralchem to 48 per cent, below the controlling threshold, and stepped down as chief executive. All owners of Russian fertiliser companies that were under sanctions did the same.
“The companies de jure should not be under sanctions. The UN supported this message,” Mazepin said. “But then we get what we call ‘over-compliance’. A minor lawyer in a bank says: ‘no, there are sanctions, we won’t open an account, we won’t accept payments . . . ’ and so on,” he added.
“We can’t even pay for transportation when the cargo is humanitarian and is being presented free of charge to Africa. The banks do not accept our payment.”
However, though Russian fertiliser exports fell initially after the invasion, in terms of value, the country’s revenues from crop nutrients have soared as the prices have jumped, said Josef Schmidhuber at the UN Food and Agriculture Organization.
On ammonia exports, the pipeline deal has yet to be finalised, although the UN said last month an agreement was “quite close”.
Russian and Ukrainian officials have been discussing a possible prisoner swap that could be linked to the reopening of ammonia exports, according to three people familiar with the talks. Mazepin said Kyiv was attaching “political and other demands” to the deal, without naming what these were.
Additional reporting by Emiko Terazono in London, Max Seddon in Dubai and Roman Olearchyk in Kyiv
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