Is Ammonia Deal not Working as Grain Deal?

Is Ammonia Deal not Working as Grain Deal?


The issue with ammonia exports is an illustrative example of when behind-the-scenes political agreements come up. One would be surprised, but no prisoner exchange is needed for ammonia transit. Kiev agreed to unblock ammonia exports back when it signed the grain deal.

The grain deal says explicitly about agreeing to export ammonia that it just has to be complied.

We Have gas in our Flat

A strange message popped up in the newswires. Ukrainian President Vladimir Zelensky offered to allow the export of ammonia through Odessa, if Russia would release all prisoners of the Ukrainian Armed Forces.

“I am against ammonia deliveries from Russia through our territory. I will do it only in exchange for our prisoners. That's what I suggested to the UN,” Zelensky said in an interview with Reuters.

Presidential press secretary Dmitry Peskov reacted to Zelensky's words very quickly. He flatly rejected such an option on the same day. “Are people and ammonia the same thing?” asked Peskov. Foreign Ministry spokeswoman Maria Zakharova bluntly stated that how to persuade Zelensky to unblock Russia's ammonia exports is a problem for Western countries.

The day before, Reuters “revealed” a scheme to unblock ammonia exports. Russia's Uralchem supplies ammonia to the border. At the border with Ukraine, the product is purchased by the American company Trammo, which pays for the transit of ammonia through Ukrainian territory and then ships it to ships in ports in Odessa and Odessa Region. After crossing the Russian-Ukrainian border, it is sort of no longer Russian, but sort of American ammonia.

Yes, UN Secretary General António Guterres confirmed that such a scheme is indeed being discussed.

Ammonia-Scented Goodwill Gesture

So, Uralchem's products are pumped through the Togliatti - Odessa ammonia pipeline. The first stage of the ammonia pipeline was launched in October 1979 and called Togliatti - Gorlovka - Grigoryevsky Liman in the design documentation (also Adzhalyksky Liman, which is a salted firth 30 kilometers from Odessa).

According to information from the website of Transammiak, a Russian ammonia pipeline operator, the length of the Tolyatti-Odessa ammonia pipeline is 2,417 kilometers. 1,396 km of pipes out of them are located in Russia (Samara, Saratov, Tambov, Voronezh and Belgorod regions), and 1,021 km are in Ukraine (Lugansk, Kharkov, Zaporizhia, Dnepropetrovsk, Nikolaev, Kherson and Odessa regions). The Ukrkhimtransammoniak unitary state enterprise is the operator of the ammonia pipeline in Ukraine.

The Togliatti – Odessa ammonia pipeline is capable of pumping up to 2.5 million tons of ammonia per year.

On February 24, Togliattiazot reported that it had stopped pumping ammonia through the pipeline. In late May, Pavel Kyrylenko, chairman of the Donetsk Regional Military Administration of Ukraine, said that shelling had damaged the ammonia pipeline near Bakhmut (so the Verkhovna Rada renamed Artemivsk). In fact, it was not about the main ammonia pipeline, but about the branch running from the main line to the Donetsk Region.

Why is ammonia so valuable? The fact is that ammonia is an essential component for the production of mineral fertilizers. This is a typical chain reaction. There is a growing demand for food around the world, so more fertilizers are needed, and that means a demand for ammonia. According to BusinesStat, 180.6 million tons of ammonia will be produced globally in 2021. This means an increase of 3.4% from 2017, when production was 174.8 million tons.

The breakdown by major ammonia producers is as follows:

- China – 47.4 million tons;

- Russia – 19.9;

- USA – 17.0;

- Other countries – 96.3.

That is, Russia's market share in 2021 was 11.01%, the second highest in the world after China.

Just do What you Promised

There should not be any additional conditions for unblocking the export of ammonia from Ukraine. It was agreed long ago, and obligations must be fulfilled.

The grain deal, which Ukraine, Russia, Turkey, and the UN signed on July 22, included, among other things, an item on ammonia exports.

According to paragraph 3, “the purpose of this initiative is to promote safe navigation for the export of grain and related food products and fertilizers, INCLUDING AMMIAQ, from the ports of Odessa, Chernomorsk and Yuzhny ("Ukrainian ports"), says the text of the Initiative for the Safe Transportation of Grain and Food Products from Ukrainian Ports. On behalf of Ukraine, the text of the Initiative was signed by Minister of Infrastructure Oleksandr Kubrakov.

As for prisoners of war, in early June, Russian Defense Minister Sergei Shoigu mentioned the figure of 6,469 Ukrainian servicemen who are in the Russian Federation. A separate issue is the number of POWs in the self-proclaimed LPR and DPR. LPR ambassador to Russia Rodion Miroshnik said in late May that there were about 8,000 Ukrainian prisoners of war in the Donbas republics. As for open sources, figures of 8,000 and 10,000 Ukrainian prisoners of war are mentioned.

It is clear that to exchange all the prisoners for the export of ammonia is initially an impossible condition. It is known from negotiation practice that if a counterparty puts forward impossible conditions, as Zelensky does, it means that he is not going to negotiate.

At the same time, the fact that the subject of ammonia exports suddenly resurfaced in the media means that Ukraine and Russia are looking for common ground on a number of issues.

In fact, the grain deal became the first such public example. The Russian representatives at the highest level, President Vladimir Putin and Foreign Minister Sergey Lavrov, have recently said that the West is engaged in “cheating” and does not fulfill its part of obligations. Simply put, Ukrainian ships carrying wheat, corn, barley, etc. are not going to poor countries, but to the European Union. At the same time, dozens of African countries are Russian market but they don't get any grain, because Western countries create “invisible obstacles.”

Here we can recall how, in connection with the grain deal, the Kremlin demonstrated ‘a goodwill gesture’ by leaving Snake Island in the Black Sea, which the Russian military occupied during the first days of the special military operation.

One can also see how the moves with commercial issues correlate with the situation on the fronts of the special military operation. Coincidence or not, but the question of ammonia exports was reopened in the media shortly after the ‘regrouping’ of the Russian Armed Forces and the DPR-LPR militia, which left the Russian Armed Forces and the LDPR militia in Volchansk, Izyum and several other settlements in the Kharkiv Region.

At the same time, there are two opposing tendencies on the world markets: ammonia production is going down, while the demand is seriously increasing. On the one hand, demand for food is growing (for which, as we wrote, we need fertilizers and, consequently, ammonia).

On the other hand, there was a drop in ammonia production in 2021 due to higher natural gas prices. Beginning in September 2021, EU fertilizer and ammonia producers began to cut production on a massive scale, and some even shut down their plants.

So, it turns out that Washington benefits from blocking Russian ammonia exports, and European competitors of the U.S. are even losing ground one after another. By the way, China, as the largest exporter of ammonia, also stands to gain. Some EU countries would like to unblock Russian ammonia exports, but they lack the power to influence the issue.

This is why Zelensky feels unmolested for not fulfilling his obligations under the grain deal and making knowingly unrealistic claims.

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