President of Russia Vladimir Putin: Mr Guryev, over the past decade Russia has increased fertiliser production by 40 percent, becoming one of the world’s leaders in this area. It is fully self-sufficient in all main types of fertilisers. However, we are aware of the problems this industry is facing today.
Of course, it would be very interesting for me to hear your assessment on what is happening today and what must be done in terms of support. I hope you will tell me not only about your company’s work, which a national and global leader, but also about the industry as a whole, considering that you are one of the top leaders of RAFP.
Go ahead, please.
President of the Russian Association of Fertiliser Producers Andrei Guryev: Thank you, Mr President. I am grateful for the meeting.
In fact, I would like to start with our mineral fertiliser industry. As you said, today we are a leader, and guarantor, of food security, and not just in the Russian Federation but throughout the world.
Over the past decade, we have increased production of all types of fertilisers by 40 percent – up to 55 million tonnes. We have surpassed the United States and India in this respect, and we are now second in the world after China. This is really an enormous achievement.
Of course, our priority is the Russian domestic market. We are fully meeting demand. In the past decade, fertiliser sales in the Russian market have increased by 2.5 times – to 13.2 million tonnes. This is an all-time record.
And, of course, we are now the world's largest exporter of mineral fertilisers, with an export capacity of about 37–38 million tonnes, although that was in 2021. In 2022, it is clear that we had a slight drop due to the sanctions and all the export problems that happened.
Nevertheless, all of this has been made possible thanks to the largest investments that have been made over the last 10 years. In 2013, our industry began a new investment cycle, and 1.8 trillion rubles was invested – big numbers. We paid more than 600 billion rubles in taxes alone during that time. In 2022, we paid about 200 billion rubles in taxes, which is also a record for our industry.
We have 36 enterprises in 21 regions of the country, and more than 110,000 professional, highly skilled people working in our industry. And I would also like to say something about the industry's social policy: indeed, this is a champion industry – we are developing rapidly and investing. Average wages in 2022 increased by 16 percent, and in leading companies, such as PhosAgro, even by 22 percent.
Vladimir Putin: How much do your people receive on average?
Andrei Guryev: The average wage is 130,000 rubles. It varies by region, but this is the average, and it also depends on bonuses. Accordingly, different companies have their own social policies: some pay more, some less, but I nevertheless think the results are good.
Vladimir Putin: It is complicated work, a complicated industry.
Andrei Guryev: Speaking of exports, over the past 10 years, Russia has accounted for one-third of global growth in fertiliser production.
Vladimir Putin: That's a record.
Andrei Guryev: For 10 years, we have been increasing nitrogen by 50 percent, phosphorus by 55 percent and potassium fertilisers by about 30 percent. There was a drop in 2022, but it is again due to sanctions and so on.
Gas consumption today, as an example, amounts to 20 billion cubic metres.
Vladimir Putin: For these ends, for these products?
Andrei Guryev: For our products. As of today, this is actually one fifth of our gas exports…. And in effect, nitrogenous fertilisers are gas in a dry state, which we export – such products as export carbamide, ammonium nitrate and compound fertilisers.
The strategy for the next five years. I reported to you at our meetings more than once that the industry is developing dynamically. The Government adopted support measures. I would like to thank you, Mr President, and the Government of the Russian Federation for the existing support measures, which include special investment contracts (SPIC), a Corporate Competitiveness Enhancement Programme (CCEP), and an Investment Protection and Promotion Agreement (IPPA). These measures proved to be effective, necessary and in demand in the previous investment cycle. They have been fully approved. Thus, all our investment plans, which we set for the next five to seven years, are based on the operation of these tools.
Vladimir Putin: Did the SPIC turn out to be good?
Andrei Guryev: Both SPIC and CCEP turned out to be good. All programmes are working, making the economy and investment in enterprises convenient and very efficient.
The strategy for five years – 1.6 trillion rubles have already been declared – these include signed SPICs, signed IPPAs, signed programmes. So, these are basically the projects to be implemented.
However, these investments can potentially be increased in the next years – up to 2027 – to two trillion rubles. What will this result in? We will produce 70 million tonnes of mineral fertiliser instead of today’s 55, which is a 30 percent increase equal to 15 million tonnes. This means 3,000 highly qualified jobs in the regions of our country, as plants and mines will be built from scratch. The capacity of mineral fertiliser production in 15 years will be twice as big, a new industry in fact.
Vladimir Putin: Mr Guryev, in this regard I would like to extend my gratitude both to you personally and to all those working in the industry for what you do for the development of national agriculture. We achieved a record-breaking harvest last year thanks to, among other things, increased use of fertilisers in agriculture, in our national agriculture. This is, to a great extent, the result of your work.
Andrei Guryev: Thank you, Mr President. This is the result of your work and the work of the Government because those support measures which were rendered to Russia’s agriculture, our strategic priority (we are a strategic partner of the Russian agro-industrial complex) … And there was a 150 percent growth in the supply of mineral fertilisers from 2013, which is an annual growth of 11 percent. I can cite an example: the average growth of mineral fertiliser consumption in the world amounts to only 1.5 percent. We are moving forward at a great pace. And since 2018 we have been fulfilling the goal of doubling the consumption of mineral fertilisers set by Minister [of Agriculture] Dmitry Patrushev and, accordingly, the growth has already constituted 60 percent.
Vladimir Putin: Here you have a more modest figure for the gross output of grain in 2022 – 155 million tonnes, but in fact it’s above 157 million. And the growth of grain exports exceeded 200 percent.
Andrei Guryev: If you take a look, the application of mineral fertilisers has doubled, from 37 to 74 kilogrammes per hectare. Of course, mineral fertilisers do not represent all of agriculture, this is not the entire growth: there are also plant protection agents and a host of issues that contribute to the cost price. But this is very important as a fact, nevertheless, and we believe in the further development of agriculture, all the more so as our mineral fertilisers are the most environmentally friendly, as you are aware.
Vladimir Putin: Shall we keep a discount for our agricultural producers?
Andrei Guryev: Yes, I would like totalk about it. In July 2021, due to the volatility and growth of prices both for energy, and, as a result, for mineral fertilisers, the industry made a decision to fix prices for mineral fertilisers. And this paid off. So, we met the Russian market’s demand for mineral fertilisers of all kinds in full, to a hundred percent. We prevented a price rise, export prices did not enter the Russian market, which is very important.
And even today we see that for Q1 (these are average data of the Federal State Statistics Service) the difference between exports and the domestic market for nitrate fertiliser is about 40 percent, 15 percent for carbamide, for nitrogen-phosphate fertiliser… Meaning that today Russian agricultural producers purchase the world’s most environmentally friendly fertilisers at a cheaper price and have a sufficient supply of them.
Vladimir Putin: I remember you told me that the quality of our fertilisers is extremely important for the end product, for the consumer of agricultural products.
Andrei Guryev: Absolutely. There is no cadmium or heavy metals in them. Thus, they do not enter the human digestion system.
You issued an instruction to create a green brand, the Green Benchmark label. In fact, mineral fertilisers were the first to be certified, so today they can use this label both in Russia and abroad to demonstrate that they are eco-friendly. This is something that matters for our consumers since this enables them to market their products, like flour or whisky, if we take this example, as cadmium-free. Once again, this covers the entire supply chain all the way to the end product.
Vladimir Putin: Mr Guryev, Russia is among the leaders, if not the leading supplier of mineral fertiliser to the global market. What effect did restrictions in terms of logistics, financial transactions and insurance have on the global fertiliser markets?
Andrei Guryev: First, I would like to mention the role we play in terms of exports.
Russia is the world’s biggest exporter. We supply some 37 million tonnes of mineral fertiliser to the global market, which accounts for about 20 percent of the global mineral fertiliser exports. We are second to none in this segment. Most of these supplies, about 70 percent of our mineral fertiliser exports, go to the countries which are friendly to us.
It is true that the situation we saw when sanctions were introduced, primarily what happened to natural gas and in the energy sector, as well as surging prices, all this resulted in lower mineral fertiliser consumption in 2022.
There were many factors, of course. In 2022, Russian exports decreased by 15 percent compared to 2021, when this indicator was at its all-time high. This was primarily due to the sanctions imposed in the first six months of the year, as well as the challenges we had to address, including insurance for ships, problems with transactions, and banks losing access to SWIFT. In addition to this, all Russian mineral fertiliser producers faced sanctions, with most of them imposed in March. The European sanctions were imposed in March, followed by US sanctions in the summer.
Vladimir Putin: I have been wondering, how much of our fertilisers go to the European markets and how much to the developing countries?
Andrei Guryev: Developing countries, i.e., the Global South, account for 70 percent.
Vladimir Putin: Does this mean that the countries which do not need our fertilisers all that much were the once to impose sanctions, leaving the developing markets to suffer? Is that the case?
Andrei Guryev: Yes, precisely.
We can assume that mineral fertiliser production was a very urgent issue for Europe. They stopped making them…
Vladimir Putin: Because of energy and gas prices.
Andrei Guryev: Gas prices, indeed. However, they did buy these fertilisers. In fact, they provided subsidies to their farmers, bought these fertilisers at a high price and brought them to the market. But markets have a certain capacity and cannot be extended or shrink without any consequences. What I mean is that these fertilisers never made it all the way to the markets where they were supposed to be sold – Latin America, Africa or Asia. By the way, Asia is also a very big market. And all this was happening while China, another exporting country, was also absent from the market. This is why mineral fertiliser consumption decreased in 2022 by about 10 percent, in the range of 36 to 38 million tonnes. This figure matches Russia’s exports of 36 million tonnes, which account for 20 percent of global exports. This is like going without mineral fertilisers in Russia for three years.
Vladimir Putin: Do you mean in adjusted terms?
Andrei Guryev: Yes, as adjusted. This was a major shock for the global market, disrupting value chains and undermining their sustainability. Of course, this factor will continue driving food inflation, since one follows the other.
Vladimir Putin: I see.
Andrei Guryev: This is how it goes: energy, then food inflation, and then the de facto famine.
Vladimir Putin: The point I wanted to make is that those who imposed sanctions wanted to act against us, but developing markets in Africa, Latin America and Asia were the ones that suffered.
Andrei Guryev: Exactly. And this will lead to higher food prices. If we look at the global agricultural product stocks today, they have never been that low in decades, while average agricultural prices are at their ten-year high.
Vladimir Putin: Underusing fertilisers will result in lower yields.
Andrei Guryev: Lower fertiliser consumption means lower yields. This process has already been set in motion.
Vladimir Putin: And higher prices.
Andrei Guryev: And higher prices.
In July, we tried using the Black Sea Initiative, the grain deal, to address the challenges we faced, but you know all too well that it was a total failure as far as fertilisers are concerned.
At the same time, some of the challenges we face have been there since early 2022 and have not gone anywhere. There is still a freeze affecting our assets abroad, ammonia sales have not resumed, and the restrictions on insuring and reinsuring Russian ships have not been lifted. There is also the lingering ban on Russian ships from entering ports, as well as a ban on supplying agricultural equipment, parts and maintenance services to the Russian Federation. This affects our companies, including both the chemical sector and the mining industry, and this means potassium and phosphorus. In fact, this is a major common challenge we will face in the future, and we must do something to resolve it.
I want to reassure you that all companies have been coordinating their efforts and working together to explore alternatives. We are trying to understand what can be done on the domestic market by promoting import substitution. Make no mistake, we will overcome these challenges.
In conclusion, I would like to thank you and the Government of the Russian Federation for the attention you have been paying to our industry and the agricultural sector, since our efforts are complementary.
Of course, I would like to reassure you that we will remain a guarantor of Russia’s food security. I do hope that our sector will retain its role as a leading guarantor of global food security.
Vladimir Putin: Mr Guryev, I looked at your development plans and the need to expand port capacity. We will make sure to do this, including in the north, in Russia’s Far East and in the south of the country. I hope that all these plans will materialise as part of the five-year development strategy for the industry. I wish you all the best.
Andrei Guryev: I can add that projects to expand port capacity by about 20 million tonnes are currently underway. I am referring to Ust-Luga, Nakhodka, Taman seaport, Lavna, Temryuk and Caucasus. All these projects will be completed.
There is a problem with liquid mineral fertilisers and ammonia exports as we used to ship them through the Baltic states. We are trying to solve this issue, guided by a Government roadmap to this effect. I think that everything will be fine.
Vladimir Putin: Good. Thank you very much.