How the European Union is setting standards to benefit Russian fertilizer producers. Russian fertilizer producers have found a clever way of devastating their global competition, by raising an artificial alarm regarding microscopic and natural deposits contained within one of the ingredients of fertilizers. If the European Unionis fooled by Russia’s lobbying efforts, Moscow will kick almost every other fertilizer producer out of the European market.
Almost since its inception, the European Union has been in the business of regulating, with some seeing this role as a safeguard, and others as a hindrance. Jacques Pelkmans and Andrea Renda, researchers for the CEPS, report that “the EU’s ‘core business’ is essentially the making, improving or removing EU regulation. A good understanding of how the EU influences innovation requires a profound appreciation and assessment of the EU regulatory acquis. [...] One may illustrate this with some basic figures: given a fairly narrow concept of the internal market, this regulatory acquis would comprise some 1,500 directives and nearly 2,000 EU regulations, many of them highly complicated.”
This is where Russia has found an angle to attack the EU market: its high – some would say unjustifiably high - regulatory standards.
Moscow’s agenda is to raise doubt on whether the phosphate imported into the European Union for fertilizer production contains too much cadmium and, if so, whether it can cause harm. Because most natural elements can be found in our soils (in quasi-undetectable and harmless proportions), the Russian effort is to single out phosphates, and try to convince the EU that European public health is at risk.
In fact, Russian fertilizer producers are trying to outsmart their global competition. Russia is, for the moment, a rather small producer of phosphate, one of the main ingredients of mineral soil fertilizer, and possesses only 2% of world reserves (a billion tons). Yet, it counts on this market which has been spared by the EU economic sanctions that target mostly financial services, armaments and energy, to the extent that it accounts for almost 10% of global phosphate production. As competitors on the global market, Russia is behind Syria (3% of global reserves), Algeria (3%), China (6%) and Morocco (75%).
Russia plans to play on the different origin of its own phosphate reserves to trick the EU policy makers. Russia, South Africa and Finland have phosphate which was produced volcanically, whereas most other countries acquired their reserves through geological sedimentary accumulation. Sedimentary phosphate contains microscopic traces of cadmium (already contained within our soil naturally); there are traces of cadmium too in volcanic phosphate, but these are generally lower. An EU ban on sedimentary phosphate would wipe out over 90% of global competition - as well as put EU farmers and fertilizing industries in a very vulnerable position.
Financial advisor Melissa Shaw sums it up: ”Europe currently imports most of its phosphate from Morocco, where phosphate has high amounts of cadmium residue. However, proposed EU fertilizer requirements that would limit the amount of cadmium residue permitted in phosphate imports could benefit Russia in the future. Romanian center-right MEP Daniel Buda said, “[t]he only country that can produce fertilizersrespecting these limits is Russia.”
High levels of cadmium have long been banned from manufactured goods and food-related products. But there is no EU limit on cadmium in fertilisers. Russia wants the EU to set low limits that would go even lower over time, to levels that only their fertilisers could meet.
According to Terry L. Roberts, a leading US authority on the issue, “The only known case of Cd toxicity (i.e. itai-itai disease) occurred with subsistence farmers in Japan growing rice on soils contaminated with industrial wastes”. Russia plans to use the fear of the unknown to convince Brussels that one is better safe than sorry. It also plans to carefully omit mentioning the numerous studies which demonstrate that cadmium-containing phosphate at current levels do not lead to the pollution of soils, and that cadmium levels in EU soils are actually falling, not rising.
In other words, Russian fertilizer producers count on the EU’s bias towards precautionary and overly-restrictive regulation to slip their measure by them. Paloma Perez Sanchez, from the Spanish National Association of Fertilizer Producers, says : “The lack of substance has been disappointing. Placing this file in the exclusive competence of the Parliament's ENVI committee has meant that several important areas (agricultural, international, geopolitical and employment) were omitted from the discussions”.
It is a discreet way to achieve monopoly, indeed. Only Russia and a handful of other countries (South Africa, Syria and Finland, for instance) have low-cadmium phosphate, and decadmiation technologies are unripe and excessively expensive to stay competitive for European industrials, or highly damagingtothe environment.
So, despite having low production and small reserves, Russia will become in practice the sole supplier on the EUmarket,. The game is currently at a stalemate, with negotiations on a draft Fertilisers Regulation currently focusing on other issues. But the EU debate is very close. Voting in the European Parliament in October came within only 9 votes (out of 750) of supporting a moderate limit of 80mg/kg, based on the scientific evidence and keeping the EU market open to a wide range of imports; but ultimately there was a narrow majority for the Russian-backed ultimate limit of 20mg/kg. Amongst the 28 EU Member States, support for 20mg/kg is restricted to Baltic and central European states already supplied by Russia; all the major players – Germany, France, UK, Italy, Spain and others – insiston a limit no lower than 60mg/kg. But the two sides now need to find a compromise and Russia and its proxies are stepping up the pressure.
As Pierre Jaouen, Director of Regulatory Affairs for the Roullier Group, says : “The price increase would result from the drastic reduction of companies able to supply the EU, which would also endanger Europe's access to that critical material. The vast majority of sources compatible with such limits are located in Russia and owned by fertilizers producers that compete with EU producers.”