The European Commissioner for agriculture, Janusz Wojciechowski, on Thursday said he is lobbying for the EU to subsidise Ukrainian grain exporters over the next year, at an estimated cost of €600 million ($652 million).
The subsidies would help the companies cover the transport cost of 20 million tonnes of grain to seaports in the Baltic Sea, Germany and Poland, while appeasing the diplomatic tensions caused by excess grain exports ending up in neighbouring EU states, according to Mr Wojciechowski.
Just under half of grain exports from Ukraine used to transit via the Black Sea. This route all but stopped when Russia withdrew in July from a UN-brokered agreement, threatening the safety of ships.
“This is the best compromise solution,” Mr Wojciechowski told reporters after an exchange of views on Ukraine's trade issues with European Parliament members in Brussels in the first public debate about his proposal.
The export of Ukrainian grain has become a hot topic within the EU after five countries – Poland, Bulgaria, Romania, Hungary and Slovakia – complained about a sudden flood of imports bringing down the price of local produce.
Speaking members of the parliament's agriculture committee, Mr Wojciechowski said that before Russia's invasion of Ukraine last year, Romania used to import “almost zero” from Ukraine.
Now the figure has jumped to one billion euros worth of agrifood products. “It's a shock to the system. It's a big distortion for the Romanian market,” he said.
Much to Kyiv's chagrin, the European Commission in May allowed a temporary ban of Ukrainian wheat, maize, rapeseed and sunflower seed exports to Poland, Bulgaria, Romania, Hungary and Slovakia. The ban was renewed in June and is set to expire on September 15.
Mr Wojciechowski said he supported an extension of the ban until at least later this year, but his proposal was currently under discussion at the Commission. It is backed by Ukraine and the five EU countries, he said.
Mr Wojciechowski plans to discuss his scheme with the EU's 27 agriculture ministers at an informal meeting next week in Spain. “We'll see the position of member states. This is very important,” he said.
The commission is expected to announce its official position before the ban expires in two weeks.
The cost of his proposal is based on Ukraine estimates of 20 to 40 euros per tonne of transported grain.
The EU would disburse the subsidies to the Ukrainian government, which would decide which companies could receive the funds, said Mr Wojciechowski.
“Ukraine will organise this,” said Mr Wojciechowski, responding to a question from The National.
“It [might] be many companies, [or] one company. It's a question for Ukraine, not the European Union. The idea is to support Ukraine, and Ukraine must organise the whole process.”
Mr Wojciechowski told MEPs that since the introduction of the temporary ban, “only two to three per cent” of Ukraine grain exports that transit via the five concerned countries was then sent on to third countries.
The rest stayed in the EU in countries like Germany, the Netherlands and Italy.
“There are no buyers,” said Mr Wojciechowski. “We are not capable of forcing others to buy Ukrainian grain which is more expensive because of transit and transports costs via Romania or Poland.”
More expensive Ukrainian grain allows cheaper Russian products to replace Ukraine in its former export markets, warned the Polish commissioner.
“Ukraine needs to find global markets, global outlets,” said Mr Wojciechowski. “Russia is trying to replace Ukraine on those markets. But Ukraine can manage. The only problem is additional costs.”
MEPs acknowledged the complexity of the issue.
Irish left-winger Luke “Ming” Flanagan said Ukraine's grain exports were likely to remain a long-term problem since Kyiv is negotiating with Brussels to join the bloc.
“Where do you think the grain will go when Ukraine is part of the EU? It'll go to the market that they are then part of,” he said.
“It seems like solidarity, like bread and grain, goes stale around here.”
Meanwhile, Russia is using talks with Turkey on Thursday to pitch what it called an alternative to the Black Sea deal.
The proposal, to be discussed by foreign ministers Sergey Lavrov and Hakan Fidan in Moscow, would involve Russia exporting its own grain “at a reduced price” via Turkey.
Russia said Qatar could be a financial backer but said there were no “specific results” yet on the proposal.
The Kremlin, which cited its inability to export Russian grain as a justification for quitting the UN and Turkish-brokered deal, said on Thursday that it remained a reliable grain supplier.
Kremlin spokesman Dmitry Peskov said food shortages in Africa – which charities have warned could be worsened by the deal’s collapse – were nothing to do with Russia.
Before Russia's invasion last year, Ukraine was one of the world's top grain exporters.