Editor’s note: The Kyiv Post’s upcoming Legal Quarterly “Monopolies” is coming out on March 30 and will include a detailed overview of the fertilizer market in Ukraine.
The Ukrainian government has increased “anti-dumping” tariffs on mineral fertilizer imports from Russia, the latest in controversial efforts to protect Ukraine’s uncompetitive domestic fertilizer producers.
Now imports of ammonium nitrate fertilizer by the company Dorogobuzh — part of the Acron Group controlled by Russian billionaire Vyacheslav Kantor — will be taxed at 29.25 percent. Ammonium nitrate from other exporters and Russia on the whole will face a duty of 42.96 percent, according to a statement by Ukraine’s Economy Ministry.
The ministry alleges that Russian producers have frequently violated the procedures for importing to Ukraine and attempted to avoid paying tariffs by changing the descriptions of the fertilizers being imported. This led the ministry to conclude that the previous tariffs were not enough to prevent dumping by Russian producers.
But agricultural economists cast doubt on claims that Russian producers are dumping. They note that Ukraine’s internal market is largely monopolized, with four fertilizer plants belonging to oligarch Dmyrto Firtash’s Ostchem Group controlling upwards of 80 percent of the domestic market for several varieties of mineral fertilizer. Firtash and Ostchem actively lobby to protect their monopoly, the economists say.
This result is higher prices for Ukrainian agricultural producers.
“Mineral fertilizer prices in Ukraine are about 40 to 50 times higher than in neighboring countries — for example, Lithuania,” says Maryan Zablotsky, deputy director of the Ukrainian Agrarian Association. “Furthermore, our own fertilizer factories export for 40 to 50 percent cheaper than they sell domestically.”
Ukraine’s agricultural sector loses $250 million dollars a year by overpaying for fertilizer, he says.
Earlier this month, Ukraine’s Cabinet of Ministers approved an embargo on importing mineral fertilizer from Russia, but the measure is not yet in place. Mykhailo Sokolov, deputy director of the All-Ukrainian Agrarian Council, believes this is a bad idea because Ukraine does not even produce all the varieties of fertilizer it needs.
Compared to the embargo, anti-dumping duties are a lesser evil, but they will still negatively impact farmers, he says.
In creating the tariffs, the Economy Ministry says it took the opinions of all interested parties into account. But Sokolov disputes that claim. He was present at the Interdepartmental Commission for International Trade meeting on March 26, where the issue was discussed, along with four representatives of agrochemical companies.
“I was the only person who spoke for agricultural producers,” he says. “I asked if the ministry considered the farmer’s interests and the losses [they would incur]. I didn’t receive an answer.”
In July 2017, the Anti-Monopoly Committee of Ukraine (AMCU) ruled that Ostchem set unreasonably high prices on all types of nitrogen fertilizer in 2015-2016 and fined the company. The committee fined the company the equivalent of 10 percent of its 2016 earnings and required it to set market prices.
The organization is still investigating Ostchem and expects new developments in the next six months, AMCU head Yuri Terentyev told the Kyiv Post.
Firtash, Ostchem’s Austria-based owner, is currently fighting money laundering and bribery charges in Spain and the United States. In December, an Austrian court ruled against extraditing the oligarch to Spain. However, earlier this month, his American attorney warned a U.S. district court judge that Firtash could be extradited to Chicago in the near future.
