Sanctions on Russia Become a Lifeline for a Croatian Company

Members of the European Parliament on Thursday supported a significant increase in tariffs on the import of fertilizers and certain agricultural products from Russia and Belarus during a plenary session in Brussels, which will directly impact the operations and results of the Croatian petrochemical industry.

Specifically, the representatives supported the Commission’s proposal to increase tariffs on the import of certain agricultural products, such as sugar, vinegar, flour, meat, dairy products, fruits, vegetables, animal feed, as well as fertilizers, by 50 percent. Tariffs on nitrogen-based fertilizers imported from Russia and Belarus will be sanctioned at 6.5 percent, plus an additional 40 and 45 euros per ton this year and next year. After that, in 2027 and 2028, these tariffs will increase to 430 euros per ton. It is worth noting that despite the war in Ukraine, Russia, along with its ally Belarus, is one of the largest exporters of fertilizers to the EU.

By introducing tariffs, the EU aims to reduce the revenues of Russia and Belarus from fertilizer exports, which are used to finance the war in Ukraine. The tariffs are expected to come into effect on July 1.

– It is expected that this will not only result in further diversification of fertilizer production in the EU, which is currently affected by low import prices, but these sanctions will also directly benefit Kutina’s Petrokemija – said Croatian MEP Stephen Nikola Bartulica to journalists in Brussels ahead of the vote.

This decision now needs to be confirmed by the EU Council, and after publication in the official journal, it will begin to be applied. The Commission proposed in January of this year to introduce tariffs on the import of urea and nitrogen fertilizers from Russia and Belarus, which significantly increased last year, raising the EU’s dependence on these two countries and potentially jeopardizing food security. The EU had previously imposed high tariffs on the import of grain from Russia and Belarus. The new tariffs will apply to 15 percent of agricultural imports from Russia that were previously not subject to tariffs, valued at 380 million euros.

This news is currently met with concern in Kutina, as the management of Petrokemija recently informed union representatives that they will soon close two facilities and are preparing to lay off 160 employees out of a total of 1,153, which the unions interpreted as a ‘exit strategy’ of the Turkish owners of the company. According to Davor Rakić, a representative of the EKN union at Petrokemija, the situation, at least regarding the EU’s policy towards the petrochemical industry, is quite bizarre. He emphasizes that the EU does not allow subsidies for gas to large industries that are the biggest consumers of this energy source, so Petrokemija pays for gas at market prices, which has affected production and revenues.

– Namely, gas prices have dramatically increased due to the war in Ukraine, and consequently due to the European Commission’s decision to no longer rely on cheaper Russian gas, which has been a significant blow to an industry like ours. At the same time, the same EU and Commission allow the import of cheap fertilizers from countries like Russia, where gas is heavily subsidized. The EU market is thus full of cheap Russian, Egyptian, and Omask fertilizers that we cannot compete with price-wise, and the entire EU fertilizer production is in trouble, including us – emphasizes Rakić, adding that soon, due to sanctions on Russian fertilizer imports, the situation could change. He suggests that the price of European fertilizers may decrease relative to Russian ones, and how much will depend on the tariffs.

– Therefore, we had a meeting today with a representative of the owners, the company Yildrim Holding, who assured us that they are not giving up on Petrokemija, and they informed us that they have the financial strength to establish production over the next four years and that they, like us workers, are monitoring what is happening in the international market – concluded Rakić.