President of Russia Vladimir Putin: Good afternoon.
Mr Mazepin, even ordinary people are aware of the situation on the global fertiliser markets.
Your group of companies, UralChem, is one of the largest producers of nitrogen and potassium fertilisers and ammonia in the world. I know that you have been working successfully despite the artificial barriers raised by some countries. As far as I know, they are having a negative effect on global markets, whereas we are ready to expand our cooperation with all partners without exception.
How would you describe the current situation?
Chair of the RSPP Commission on Mineral Fertilisers Production and Trading Dmitry Mazepin: Mr President,
Thank you for this face-to-face meeting.
I chair the RSPP Commission on Mineral Fertilisers Production and Trading.
I would like to update you on the industry’s performance and also to talk about several issues you have mentioned.
The industry has been working steadily. This year we will turn out nearly as much as we did last year.
Deliveries to the domestic market have always been our priority. We are working with the Agriculture Ministry and Industry and Trade Ministry to supply our farmers with fertilisers at fixed prices. Prices are only adjusted to inflation by decision of the Agriculture Ministry. There have not been any fluctuations or problems with farms this year.
We produced 42 million tonnes of fertiliser and supplied 12 million tonnes to the domestic market. The domestic market is growing by 7–8 percent annually. We believe that the policy the Ministry of Agriculture has been pursuing is contributing to larger harvests in the Russian Federation, and we are certainly pleased with that.
At the same time, after providing the required amount of fertiliser to the domestic market, we have extra volumes left, which, historically, we used to export. However, since prohibitive sanctions were imposed on virtually all the owners of sanctioned companies, those companies have certainly been struggling with problems.
The main problem, I should say, was that a fairly large quantity of our produce got stuck in European ports. If you open the presentation, you will see that UralChem has 262,000 tonnes frozen in the ports of Estonia, Latvia, Belgium and the Netherlands, Acron has 52,000 tonnes and EuroChem – almost 100,000 tonnes.
This situation is truly challenging. All producers are facing this problem. We have tried various ways to resolve it and deliver the fertilisers, which are mainly intended for consumers in emerging markets, including Africa. For example, UralChem-Uralkali was the owner, and still is, of a port in Riga. The company owns several port terminals – in St Petersburg, in Ust-Luga and in Riga.
After the sanctions were imposed, we tried to sell the port in Riga, and we sold it to a Swiss trader. The Swiss trader came to Latvia, introduced himself and showed his documents. We proposed a deal – that we were ready to sell the port in Riga, which we built from scratch for 42 million euros, for the same amount. The money was to be remitted to Riga, and we voluntarily said, “You can freeze this money, only make sure that the port operates.” But the Latvian side began looking for ways to avoid resolving this problem.
Vladimir Putin: Looking for a pretext, right?
Dmitry Mazepin: Yes. For six months.
They honestly told us that we could appeal to the Latvian courts. So, we appealed to the Latvian courts, but the courts refused to consider this case. The Swiss trader wanted to take over the ownership of the terminal for six months but was not allowed to. Four weeks ago, they withdrew from the deal and returned the documents to us because they could not actually acquire it.
Regarding the blocked fertiliser, if you see that 262,000 tonnes have been blocked, this means that 55,000 tonnes are stored on a ship. In January, Uralkali loaded 40,000 tonnes aboard a ship in St Petersburg. In February, that ship docked in Riga and took on an additional load. Following sanctions, the ship anchored at a roadstead and has remained there for the past eight months. It is unable to either dock or sail away. We can only speculate about what is happening to the crew.
We have contacted various agencies because Uralkali- UralChem maintains partner-like relations with Africa, and we supply our products to 26 African countries. On the next page, you will see that most African regions are our partners and customers.
Vladimir Putin: In effect, this is a question of efforts to ensure food security in these countries.
Dmitry Mazepin: You are absolutely right.
We decided to supply 23,500 tonnes of free fertiliser from the St Petersburg port because we were unable to provide them with fertiliser and because fertiliser is expensive. We dispatched that ship and unloaded it. We sent it to a port in Togo, and we unloaded these 23,500 tonnes in Burkina Faso. We did this by agreement with Chairperson of the African Union and President of Senegal, Macky Sall, who said that such a country as Burkina Faso was facing serious difficulties. They have already received this fertiliser.
After that, we contacted the UN and asked them to unblock our fertiliser in four countries, namely, the Netherlands, Belgium, Latvia and Estonia.
We have shipped a trial batch of 20,000 tonnes or less than ten percent of our impounded volumes to Malawi. The UN and Ms Rebeca Grynspan actively addressed this issue, and they helped us. The Netherlands is now ready to ship this batch to us.
We are facing a problem because we are unable to pay freight charges, even if we are delivering free fertiliser to Africa. We have reached an agreement with the UN that we will remit the money to the UN. They will charter a ship that will sail to the Netherlands, take on the free batch and sail to a port in Mozambique because, according to the UN, Malawi is now hard pressed for fertiliser.
This is why I would now like to raise this issue and to obtain your approval, so that we can reach agreement on the entire initiative. We would contact the UN and the African Union, in order to unblock our entire 262,000-tonne batch. By agreement with the Chairperson of the African Union, they will list countries that are hard pressed for fertiliser, and we are ready to make these deals.
Vladimir Putin: Are you talking about free deliveries?
Dmitry Mazepin: Yes, free deliveries.
Vladimir Putin: I am sure you know that we maintain contact with UN Secretary-General Antonio Guterres and the agencies concerned, since you have mentioned the name of one of their employees. Deputy Prime Minister Andrei Belousov and the Russian Foreign Ministry are communicating with her. Therefore, instructions will be issued to all our colleagues to provide the necessary assistance to you.
The leaders of several African countries have contacted me directly about this issue. They cannot understand what is going on, because the constant message is that assistance must be provided to the poorest countries, including on issues that are not connected with food security, yet these deliveries, even free-of-charge ones, are being blocked. This is absolutely unacceptable, yet this is happening.
Of course, we must do everything we can to, above all, ensure the interests of our agricultural producers, who are reporting very good results, and to support our traditional clients, the consumers, as well as our friends in developing countries, primarily African countries, as we have pointed out. This will be correct from the humanitarian viewpoint and also in the interests of business, in the sense that you will support your markets.
Dmitry Mazepin: Mr President, thank you very much for your support, because we have come against many obstacles.
There are three main issues: chartering vessels, insurance and payments. Banks are a super-big obstacle now, because even a low-level lawyer in a bank can block transactions. We have recently stopped using euros and dollars. For example, Brazil is paying us in yuan for the fertilisers we supply. We hope that the day will come when the BRICS countries will introduce a common monetary unit or will use their national currencies so that we will be able to use rubles. Since the yuan is a highly liquid monetary asset, developing countries are willing to pay in yuan. This is convenient for us, because we cannot use euros or dollars even though it is not our companies but their owners who have been sanctioned. All the owners have either gone out of business or have reduced their involvement to a non-controlling share, like I have done.
Mr President, we have a question regarding the supply of fertilisers to Africa and emerging markets. It is about ammonia. You gave the go-ahead, and a grain deal was concluded in July; the Defence Ministry and Minister Sergei Shoigu, personally, signed a memorandum on grain transportation. That memorandum included a clause where countries, under the auspices of the UN, were to express support for allowing Russia to export the ammonia that we produced at TogliattiAzot, and unblocking the pipeline that connects Togliatti and Odessa.
We were encouraged by that. The Russian side was ready, and the pipeline on the Russian side was in working order. We had information that it could be used on the Ukrainian side as well. But time has passed, and there has been no progress. We hoped that, with the recent extension of the grain deal, this issue would be resolved as well. But I have to report to you that the Ukrainian side has put forward a number of political preconditions that are outside our competence, and we cannot proceed.
Still, I would like to report to you that starting from 2021, we have been developing an alternative route and a port in Taman. Investment in the project will total 50 billion. As many as 500 builders are working there at the moment. We hope that we will open the port in Taman by the end of 2023, and that will change the situation where the Russian Federation – a major producer of ammonia for as long as the country has existed – has been left with… Well, not a single ammonia transshipment port has been built, and we are tied down, or dependent on other countries that have such ports.
Therefore, we want to close this gap. We are working jointly with the Ministry of Industry and Trade, with the Government of the Krasnodar Territory, and other agencies. But we would like to ask you to help – to temporarily include transshipment and transportation of ammonia in Odessa in the grain deal for us, so that our product can also go to developing countries, including Africa.
Vladimir Putin: Yes. All the parameters, the figures and volumes are clear. The benefits for all participants in this process are also clear.
Didn’t a US company want to buy the product right there on the border between Russia and Ukraine?
Dmitry Mazepin: Yes, because the Ukrainian side asked us, how are you going to pay when there are no banking relations? We said that we were ready to sell the product at the factory gate, and use Transammonia, a large American trader. They agreed to buy it. They said, “We will ship it, we will deliver it.” They have been working on this market for decades. Still, the deal never got off the ground.
We hoped it would, and the UN has been feeding us promises that ammonia would be unblocked along with the new grain deal. But today I had a report that my people talked to the UN, and they were told, “The deal is already closed, sorry.”
Vladimir Putin: We will also work with the UN, with our colleagues from that organisation. We will see what we can do. You know my approach – I am not against it, go ahead.
Dmitry Mazepin: Mr President, thank you for your support.
Vladimir Putin: Kazakhstan?
Dmitry Mazepin: Yes. If I may.
Vladimir Putin: All right, Kazakhstan. But not only Kazakhstan, I hope you will tell us how you are building relations with Belarus, which is your biggest partner.