Brussels tables €100m in aid to eastern member states to stem Ukraine grain crisis

The European Commission has moved swiftly to defuse the simmering Ukrainian grain crisis, which threatens the unity of unwavering support for Kyiv among the EU’s eastern nations ahead of an anticipated counteroffensive against Russian forces in the occupied territories. Five of Ukraine’s neighbors — Poland, Hungary, Slovakia, Bulgaria and Romania — have implemented bans or are considering restrictions on the entry of duty-free grain and other agricultural products from Kyiv into the EU despite the bloc’s common trade policy, arguing that farmers and associated sectors in their own countries are bearing the brunt of the measure, which was implemented by Brussels to circumvent Russian naval supremacy in the Black Sea by lifting tariffs and other trade duties on Ukraine to help keep its economy afloat. Those five countries have now scored a point in the ongoing dispute after European Commission President Ursula von der Leyen approved a compensation package of €100 million to their farmers.

Brussels is also considering introducing extraordinary measures until June 30 to ensure that four of the products arriving from Ukraine — wheat, corn, rapeseed and sunflower seeds — do not remain in the five countries, but transit through them to the rest of the EU and other parts of the world. However, this proposal requires the agreement of Kyiv as otherwise it could violate several trade agreements, EU sources warned.

In a letter sent to the heads of state and government of Poland, Hungary, Slovakia, Romania and Bulgaria, who had demanded more help from the EC after a series of protests in recent weeks, Von der Leyen acknowledged the “unintended consequences” of an increase in flows of Ukrainian products to these member states after tariffs were lifted. But she warned: “Unilateral measures can only play into the hands of the adversaries of Ukraine and should not erode our unwavering support for Ukraine.”

European Commissioner for Trade Valdis Dombrovskis held a meeting Wednesday with representatives of the five nations to seek a solution to the impasse, but no agreements were reached. Poland, which has acted as a de facto leader of the EU’s eastern region since the Russian invasion, led calls to add more products to the list of those only permitted entry to the five member states for purposes of onward transit, according to sources in Brussels.

Sofia and Bucharest, which have both maintained softer stances on the issue, also announced Wednesday that they were joining the product ban initiated by Warsaw and Budapest to prevent Ukrainian grain and other foodstuffs from remaining on their territories. Poland had originally imposed a complete ban on Ukrainian products, but on Tuesday reached an agreement with Kyiv to allow transit through the country. Romanian Agriculture Minister Petre Daea said that containers entering the country would be sealed and that controls would be intensified to ensure that they complete their transit.

In a measure approved in June 2022, Ukrainian grain and other products have been entering the EU free of duties and tariffs both to support Kyiv’s economy and help reduce the global food crisis stemming from the Russian invasion and subsequent blockade of Ukraine’s ports, preventing exports from one of the world’s breadbaskets. However, the five eastern EU nations claim that grain, dairy and other products are flooding their markets and warehouses, rather than being moved on to other countries, contributing to a drop in prices. Over the past year, Ukraine has exported around 63 million tons of goods to the EU, half of which was grain.

There is, additionally, an element of market speculation by traders, diplomatic sources note. Brussels has also promised an investigation into logistical problems in another area of the proposed plan to mitigate the grain crisis. The sealing of containers can be imposed almost immediately, but member states must approve Brussels’ proposal to direct €100 million from the bloc’s agricultural reserve fund to Poland, Hungary, Slovakia, Romania and Bulgaria.

Poland, which has been one of Ukraine’s key allies since the start of the war, has pointed out that logistical problems and bottlenecks make it difficult to get what arrives from Kyiv out again. Its farmers have been taking to the streets for several weeks in protests mirrored in the other four affected nations, who had issued a joint letter to Von der Leyen demanding more economic aid, logistical solutions and the reinstatement of tariffs on Ukrainian goods. Poland and Slovakia, moreover, are scheduled to hold elections in the autumn, placing the grain crisis at the forefront of political campaigning. Furthermore, negotiations are currently underway to extend the lifting of tariffs and duties to cover all Ukrainian products, which was also a factor in Poland, Hungary and Slovakia imposing bans in imports from Kyiv.

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