Ukraine Strikes Deal With Poland Over Grain Exports – Analysis

By Claudia Ciobanu, Nicholas Watson and Edit Inotai

The Polish and Ukrainian governments on Tuesday reached a deal that will allow the transit of Ukrainian food products via Poland, reversing a ban imposed at the weekend.

The Polish and Ukrainian agriculture ministers announced on Tuesday afternoon that they had reached a deal to reverse a Polish ban on the import of Ukrainian food products announced at the weekend by the leader of the ruling Law and Justice (PiS) party.

Polish Agriculture Minister Robert Telus stressed that Poland would only allow products that are meant to transit Poland to enter the country and several measures would be introduced to ensure that no produce stays in Poland, including the monitoring of transported goods by Polish security agencies, the electronic monitoring of the transports, and punishment with the loss of licences for those companies that change the destination of the products after they enter Poland.

The reversal of the ban on imports will be effective from Friday morning, the ministers said.

“We understand the causes of the nuances that appeared in our bilateral relations,” Ukrainian Agriculture Minister Mykola Solskyi said in Warsaw. “We are very grateful for the great support and solidarity which each Pole has offered us every day since the war started, we should reach victory together as soon as possible.”

The issue of Ukrainian grain and other agricultural exports to global markets ending up on the neighbouring markets of Poland, Hungary and Slovakia has become an escalating problem that is dividing not only Ukraine and the eastern EU states – hitherto among the strongest supporters of the country since it was invaded – but is also dividing those eastern states and the EU, and even dividing the eastern states themselves. It thus offers Russia’s Vladimir Putin a rare opening to exploit, as the UN-sponsored deal with Russia to allow some exports via the Black Sea is due to end on May 18 and the crisis could encourage the Kremlin to abstain from prolonging it.

Since Russia began blocking Ukrainian agricultural exports via the Black Sea port of Odesa, the EU has supported the creation of so-called “solidarity routes” that allow the grain and other produce to travel overland to destinations across Europe as well as to other regions, including Africa, Asia and the Middle East. This solution has been a lifeline for the Ukrainian economy.

Yet too much of this agricultural produce has apparently been stuck on markets in Central and Eastern Europe, putting pressure on local farmers as Ukrainian prices are so much lower.

European solution sought

The issue came to a head when the leader of Poland’s ruling Law and Justice party (PiS), Jaroslaw Kaczynski, on April 15 intervened to impose a total ban on all Ukrainian food imports, whether they are meant for the domestic market or transiting to other markets outside the EU. The regulation banned a broad array of Ukrainian agricultural products from entering Poland until the end of June.

This went against a deal struck between the Polish and Ukrainian agriculture ministers on April 7 under which Kyiv promised to halt exports of wheat, corn, sunflower and rapeseed to Poland until the start of the new season.

According to Polish commentators, the PiS leader had become increasingly concerned about losing the support of rural voters ahead of this autumn’s general election, leading to his announcement during a pre-election tour of the Polish provinces. The formal justification for the ban was that pesticides were found in some of the imported Ukrainian products and the government needed to ensure products entering the Polish market met EU standards.

Over the same weekend, Hungary also announced a direct import ban on until June 30, with Agriculture Minister Istvan Nagy complaining that the huge volumes of Ukrainian imports were harming the country’s agricultural sector and emergency measures were needed to protect farmers. Nagy added that it is no longer only about grain and oilseed.

“Ukrainian agriculture, which is using production methods no longer permitted in the European Union and having extremely low production costs, began to export large quantities of poultry, eggs and honey to the European market in addition to grain and oilseeds, which made it impossible for domestic and Central European farmers to sell their products,” he said.

Gyorgy Rasko, a renowned agricultural economist who served as state secretary for agriculture between 1990 and 1994, said on ATV that it is not only the domestic market that Hungarian farmers are worried about. Hungary exports large quantities of wheat to Western Europe and the Western Balkans, where they fear their products will no longer be competitive against Ukrainian exports.

Slovakia said it was forced to impose a ban too, although like Hungary it has excluded products transiting the country. Bulgaria and Romania said they could impose similar bans. Czechia was the only capital in the region to insist on a European solution to the problem.

An EU-wide solution is clearly needed, though the European Commission has seemed slow to act, with its analyses just a few weeks back concluding there were no significant issues caused on the internal food market by a pre-accession free trade deal with Ukraine. In April 2022, the EU introduced a one-year suspension of import duties on all Ukrainian goods not covered by an existing free trade deal, which Brussels is looking to extend.

In a press briefing on Monday, representatives of the European Commission said that they were in touch with representatives of Ukraine and the countries announcing bans, but stressed that trade policy was the exclusive competence of the EU and “unilateral action is not possible”.

In Poland, as much as 4 million tonnes of Ukrainian grain are currently held in silos, according to Andrzej Sados, Poland’s ambassador to the EU. No clear explanation has been forthcoming from either the EU or national governments as to why these bottlenecks are happening, though the EU’s “solidarity lanes” only extend to the produce moving out of Ukraine, while it’s private actors that are responsible for transporting the produce further afield.

Michal Kolodziejczak, leader of the Agrounia farmers’ union, who is currently leading a protest on the border with Ukraine, told BIRN that: “This border should indeed be closed, but it should be done on the EU level, otherwise I am afraid the grain will end up in Poland anyway, just coming from a different direction.”

“Agriculture in Ukraine is today controlled largely by oligarchs and multinationals or big investment firms. It’s them we’re helping, not regular Ukrainians, by keeping the borders open,” he argued.

The European Commission said it is considering a second assistance package, reported to be worth 100 million euros, targeting EU farmers in five countries most affected by the war in Ukraine. The first aid package, adopted in late March, was worth 56 million euros and offered compensation to Poland, Bulgaria and Romania, but omitted Hungary and Slovakia. Poland received almost 30 million euros from the first scheme and could get a similar amount of the second.