Ukraine sues Poland, Slovakia, Hungary over grain ban, as first ship leaves port of Chornomorsk

Ukraine sues Poland, Slovakia, Hungary over grain ban, as first ship leaves port of Chornomorsk
Ukraine has filed a protest with the WTO against Poland, Slovakia and Hungary for banning its grain imports. / bne IntelliNews
By bne IntelliNews September 20, 2023

Grappling with the Russian-made headache of how to get its grain to market, Kyiv has filed a lawsuit at the World Trade Organisation (WTO) as the first of two grain ships leaves the port of Chornomorsk.

World wheat prices declined following the departure of the first ship from the Ukrainian port of Chornomorsk on September 19, falling 1.3% to $5.84 per bushel, following a 2.2% decrease the previous day, Bloomberg reports. Wheat futures have fallen by approximately 26% this year, partly due to record harvests in various Northern Hemisphere regions, including Russia, taking the pressure off supplies.

One of the world’s biggest providers of traded wheat, Ukraine had been sending part of its grain out via rail and the Central European countries, but the arrival of large amounts of cheap Ukrainian wheat caused the local grain price to collapse and Poland banned the imports. That decision was temporarily extended by the European Commission (EC) until September 15.

However, after the deadline expired Poland, Slovakia and Hungary all introduced unilateral bans on the import of Ukrainian wheat in defiance of Brussels’ decision to lift the ban. Indeed, Hungary not only renewed the ban, but extended it to another 24 agricultural products that were not previously banned. The EU ban covered wheat, maize, rapeseed and sunflower seeds.

Kyiv has complained, as grain exports is currently its major source of foreign exchange earnings and has now formally filed a complaint with the WTO arbitration body to seek compensation. Zelenskiy also took a backhanded swipe at the three governments during his UN speech on September 19, where he called for “unity” amongst the allies without naming the three explicitly.

“It is fundamentally important for us to prove that individual member states cannot ban the import of Ukrainian goods,” Ukrainian Deputy Prime Minister and Economy Minister Yuliya Svyridenko said in a statement announcing the decision on 18 September.

The three EU countries’ grain ban is a “violation of international obligations”, according to the statement, which called the unilateral actions of EU member states in the field of trade “unacceptable”.

“All member states of the bloc should co-ordinate and agree on trade policy, as it belongs to the exclusive competence of the EU,” the statement reads. 

“That is why we file lawsuits against them in the WTO,” Svyridenko said, adding that, at the same time, Ukraine “hopes that these states will lift their restrictions and we will not have to clarify the relationship in the courts for a long time”. 

The export of Ukraine’s grain has been sharply reduced after Russia suspended the Black Sea Grain Initiative on July 17 preventing Ukraine’s grain leaving by ship.

Since then Ukraine has been hunting for alternative routes to the international market and was starting to send some via the Danube, but Russia has been attacking the ports there as well as other infrastructure.

Russian attacks on ports and elevators have reduced Ukraine's ability to export grain by 33% this year. Russian strikes since July have damaged or destroyed at least 26 civilian port infrastructure facilities, warehouses, silos and elevators, reducing Ukraine's export capacity by about a third.

Britain's intelligence agency said in a report that alternative grain export routes are unlikely to match the Black Sea route, but it is hoped a new route via the Chornomorsk port will at least relieve the pressure.

Ukraine last month announced a "humanitarian corridor" in the Black Sea to release ships trapped in its ports since the start of the war in February 2022 and to circumvent a de facto blockade after Russia abandoned a deal to let Kyiv export grain. Five vessels have so far left the port of Odesa, using the corridor which hugs the western Black Sea coast near Romania and Bulgaria.

Ukraine's Minister of Agrarian Policy, Oleksandr Kubrakov, announced the Resilient Africa tanker, one of the two ships that arrived at the Ukrainian port about a week ago, left the port with a cargo of 3,000 tons of wheat and was en route to the Bosphorus on September 19. The second ship, Aroyat, remained at the port, where it was in the process of being loaded with Ukrainian wheat destined for Egypt.

Despite these positive developments, it remains uncertain whether Ukraine's efforts to open this export corridor will have a substantial impact on wheat exports. Russia has previously said that it would view any ships headed for Ukrainian ports as potentially carrying weapons.

Kyiv has also presented the European Commission with an alternative action plan to resolve the dispute with the three Central European countries controlling the export of four groups of agricultural products, Prime Minister Denys Shmyhal said.

The already approved procedure provides that goods exported to the five neighbouring countries will first receive verification and approval from the Ukrainian Ministry of Economy. In addition, Ukraine will provide information and data on the export of specific agricultural products and information on the country of destination for export.