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How the energy crisis in Europe could develop into a food crisis


The most energy-intensive industries in Europe have been hit the hardest by the continent’s runaway energy price increases. High energy prices have led to the closure of many aluminum and steel smelters. The chemical industry is shifting its operations to the United States. BASF is preparing for a long-term reduction of staff. However, there is a more significant issue for these sectors than all of these combined. Fertilizer factories are also being closed. Also, Europe’s main fertilizer suppliers, Russia and Belarus, are currently the targets of sanctions, which has led to a decrease in fertilizer imports. Both countries have responded to the restrictions by stopping all fertilizer supplies to Europe, and the repeated assurances of European officials that such exports are not sanctioned have had no effect.

According to data given by the FT from the Institute for Agriculture and Trade Policy, Russia accounts for 45 percent of the worldwide ammonia nitrate supply. In addition, it contributes for 18 percent of the supply of potash – potassium-containing salts that constitute one of the principal fertilizer grades — and 14 percent of the exports of phosphate. Belarus is also a significant exporter of fertilizers, particularly potash. However, Belarus has been subject to EU sanctions since 2021 for alleged violations of human rights, and unlike Russia, its fertilizer industry has been targeted by these sanctions. This has been a terrible coincidence for the food security of Europe. This Monday, the top executive of Norway’s Yara International, a major fertilizer producer, told the FT that “the value chains were incredibly interwoven.” “When you look at the map — where Europe, Russia, and natural resource sites are located — you can see that these networks have been established over decades. Even throughout the most frigid periods of the cold war, these products continued to flow, allowing business to continue. In the course of a few days, everything changed dramatically.”

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As with natural gas, the EU has begun searching for alternative sources of fertilizer, despite a propensity to act before thinking. Morocco is an alternative, according to a report by Euractiv earlier this month, as the country already provides approximately 40 percent of Europe’s phosphate. This number could perhaps climb significantly. Central Asia, and more specifically Uzbekistan, is another alternative. Currently, Uzbekistan exports most of its fertilizers to Asia and a few Middle Eastern nations, but this could change after a ministerial meeting between the EU and Central Asia, which is currently taking place in Uzbekistan. So, on the one hand, astronomical energy costs have demolished local fertilizer production. On the other hand, sanctions have evoked a response from Russia that was likely not anticipated, but should have been: exports have been reduced, leaving import-dependent Europe susceptible to food shocks and exposing yet another dangerous dependency.

A quick fix to the issue is not in sight, and one might not be possible for some time. If Europe is able to replace all of its fertilizer imports from Russia and Belarus, the cost will increase in a manner analogous to the gas cost increase it experienced when it converted from Russian pipeline gas to LNG. This will add fuel to the fire of inflation. Reporting that the globe is “addicted” to chemical fertilizers, the Institute for Agriculture and Trade Policy, an advocacy group for sustainable farming, issued a warning. Outside of the advocacy, however, the report did note that fertilizers are becoming extremely pricey. In 2021, the G20 countries spent nearly twice as much as they did in 2020 on critical fertiliser imports, and by 2022, they are projected to spend three times as much, or an extra US$21.8 billion. In 2021 and 2022, the United Kingdom paid an additional US$144 million and Brazil paid an additional US$3.5 billion for fertilizer imports, respectively. Production of fertilizer requires a lot of energy, so rising energy prices are a major contributor to this price increase. The global food system, particularly its European linkages, is not in good shape.

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For example, Russia continues to export fertilizers to African nations, but African nations have not slapped sanctions on Russia. And Europe cannot actually reverse course and withdraw sanctions because doing so would destroy any remaining reputation the EU may have. Those who agree with the IATP’s position that the world is dangerously dependent on chemicals may view this fertilizer problem as an opportunity. As it pushes for a 70-percent decrease in nitrogen emissions from farming — an initiative that has sparked massive farmer protests in the country — the Dutch government may actually embrace it. Recent developments in Sri Lanka indicate, however, that abruptly abandoning fertilizer dependence may not be prudent. In this regard, the addiction to fertilizer is comparable to the addiction to fossil fuels, according to some. The silver lining is that a crisis caused by an excessive reliance on external providers could, in some way, result in decreased reliance on these suppliers.

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