Ukraine’s Request for Financial Support for Grain Transport Puts Pressure on the European Union

Kiev wants more money from Brussels for the transport of grain. But there one refers to tight coffers. Is solidarity with Ukraine waning?

Export of grain and other agricultural products is particularly important for Ukraine. Before the war, they accounted for almost 60 percent of exports and the heavily indebted state was able to use the income to service part of its loans.

Advertisement

Now the situation for Ukraine has significantly deteriorated. After the end of the Black Sea Agreement and the bombing of Ukrainian ports, the only option left is export via the solidarity corridors through the European Union. But transport is expensive and grain from the Ukraine is hardly competitive under these circumstances.

The government in Kiev now has an idea as to how they can still offer their grain at market prices: the European Union should assume the transport costs. That reported Reuters on Thursday, citing a letter from the Ministry of Agriculture of Ukraine dated July 21 this year.

In it, the government in Kiev estimates that the solidarity routes could cause additional costs of 30 to 40 US dollars per ton. Should the European Union finance these transports now, it could incur monthly additional costs of up to 120 million US dollars.

EU Agriculture Commissioner Janusz Wojciechowski recently promised to transport almost four million tons of oilseed and grain from Ukraine every month. He also asked for financial support. Otherwise, Russia will benefit because it can offer its grain cheaper than its wartime opponent.

The request from Kiev presents Brussels with a dilemma. You want to help Ukraine, but you don’t have the money. The news agency Reuters reported that the EU Commission had neither the necessary funds in the budget nor could it come up with other options.

Advertisement

Reuters cites a diplomatic source in his report. She explained that money was very tight and that substantial funds could only be available after the medium-term budget review. It could be months before this is completed.

The situation is exacerbated by the import ban on Ukrainian grain imposed by Eastern European countries. Although it expires in September, five countries bordering Ukraine are already pushing for an extension.

Against this background, resistance to further support for Ukraine is also growing in other EU countries. Another diplomatic source said Reuterssome states are not willing to finance the additional transport costs if the import ban remains in place.

The EU set up the solidarity corridors last year and provided funds to eliminate logistical bottlenecks and reduce costs. Now the EU Commission is no longer sure how to finance the additional costs.

“We don’t have any instruments, and who to give the money to? There’s also the issue of competition… It’s not the Commission’s job to offer (transport) insurance. States can give guarantees, but there aren’t any final discussions,” said the source familiar with the Commission’s talks.

Thanks to the solidarity corridors, Ukraine was able to route almost 60 percent of its exports through the European Union. Two thirds of this was transported via the Danube Delta. The remaining 40 percent went across the Black Sea.

On Monday, Russia bombed several Ukrainian ports and silos on the Danube. This dampened hopes in Brussels that Wojciechowski’s promise could be kept. One is still in the process of assessing the risks and damage, it said.
(Bernd Mueller)