Under U.N. Pressure, EU Seeks to Unblock Transit of Russian Fertilizers

At the heart of the issue is a battle of narratives over who is to blame for a surge in food and fertilizer prices over recent months. Western countries blame Russia’s invasion of Ukraine for the surge in prices. The Kremlin blames Western sanctions.

Wheat prices jumped by 46% and corn by 11% in the immediate aftermath of Russia’s invasion. Prices stabilized following the signing of a grain-export agreement brokered by the U.N. and Turkey in July. The U.N. World Food Program said earlier this year that 50 million people are near famine.

The EU has consistently pointed to language in its sanctions legislation stating that food, fertilizers and other key humanitarian goods are exempt from sanctions. The reality has become more complex.

In recent months, vessels carrying fertilizers have been held up for weeks or denied permission to transit through large European ports, such as Rotterdam in the Netherlands, because of concerns over sanctions.

Among the targets of EU sanctions on Russia’s elites are current or former owners of some of Russia’s biggest companies producing and distributing fertilizer. They include

Andrey Melnichenko,

the founder of EuroChem Group; Andrey Guryev, the former head of PhosAgro and Viatcheslav Moshe Kantor, Acron Group’s owner.

Customs authorities in some member states said that as a result of the sanctions, vessels carrying fertilizer linked to sanctioned Russian oligarchs couldn’t transit through their ports because the facilities couldn’t accept payments for harbor fees and other costs or permit payments to companies linked to oligarchs whose EU assets had been frozen. Some vessels did transit through but were held up for weeks because of the need to receive clearance from national authorities who themselves were unsure of the sanctions rules.

Under Thursday’s deal, agreed after days of arguments within the 27-country bloc, it was agreed that national governments can unfreeze the assets if strictly necessary for shipments of fertilizers. The exemptions must be reported to the European Commission, the EU’s executive body, to ensure they are being properly applied.

To stop sanctions circumvention, the exemptions would only apply to people or entities linked to a significant Russian agrifood business that was active in the field before being sanctioned. The shipment must also be part of a U.N. program shipment or go to a developing country covered by the U.N.’s food-security priorities.

The exemption was fought over by Poland and Lithuania, which firmly opposed a weakening of the sanctions regime and believed a broader loosening of restrictions could allow Russian officials to circumvent EU sanctions. They were staunchly opposed to suggestions of giving specific Russian oligarchs a direct exemption.

On the other side, EU member states with major ports were concerned the exemptions wouldn’t be strong or clear enough to ensure vessels carrying fertilizers and food would be able to freely come and go. At least one member state convened a last-minute call Thursday evening with customs authorities to ensure the proposed rules would allow for transit.

People involved in the negotiations say the exemption should significantly improve the transit of fertilizers through the bloc, although they accept that difficulties could remain. One potential challenge: identifying which countries count as being U.N. priority destinations and ensuring that the final destination is what is claimed.

The war in Ukraine came as the world was in the grips of a fertilizer crisis. Fertilizer prices have almost doubled since May 2020, according to the World Food Program. Global production of corn, rice, soybeans and wheat is expected to drop by 2.4% this year due to fertilizer shortages, according to Gro Intelligence, a New York-based analytics platform cited by WFP.

Russia was the world’s top exporter of nitrogen fertilizers last year and a leading supplier of two other types of fertilizers, potassic and phosphorous, according to the Food and Agriculture Organization.

The EU’s decision comes after months during which the U.N. worked to facilitate Russian food and fertilizer exports in keeping with an agreement with Moscow that was part of a deal that unblocked Ukraine’s Black Sea grain exports earlier this year.

The U.N. secretary-general welcomed the decision as “a significant contribution to bring Russian exports of fertilizers to global markets,” said a U.N. spokesman.

Mr. Guterres and U.N. officials have been working with the European Commission and European Union member states to “further clarify and fully realize the food and fertilizer exemptions more effectively to address global food insecurity,” the spokesman said.

The grain deal was rolled over for four months in November. As a separate aspect of the grain agreement, the U.N. agreed to ease exports of Russian food and fertilizers.

The exemptions came alongside a new package of export restrictions, a ban on investing in Russia’s mining industry and targeted sanctions against Russian political and military officials and others, the ninth such sanctions package the EU has approved against Russia since the start of the war. That includes restrictions on exports of technology and of drone engines and engine components to Russia.

Write to Laurence Norman at laurence.norman@wsj.com and Jared Malsin at jared.malsin@wsj.com