Mineral fertilizer company EuroChem has sold its Ukrainian subsidiary, Agrocenter EuroChem-Ukraine, after the country’s government imposed an embargo on the import of Russian fertilizer.
The firm — which is based in Switzerland, but is 90 percent owned by Russian industrialist Andrei Melnichenko — made the sale to a company “connected to the subsidiary’s former management,” according to a May 16 statement on EuroChem’s website.
The fertilizer producer based its decision on “recent actions in Ukraine to restrict foreign suppliers of fertilizer, and expectations of a further deterioration of the business climate.”
EuroChem has not disclosed the price and terms of the deal.
The sale marks the company’s exit from the Ukrainian market after more than 15 years. However, EuroChem intends to continue consultations with the Ukrainian authorities on future opportunities in the country.
“We’ve sold the business, but never say never,” Guy Dresser, EuroChem’s head of communications, told the Kyiv Post on May 21. “Ukraine has been an important market for us, we’ve made huge commitments to the market in the past, and we’ve invested a lot.”
Over the last year, EuroChem has struggled to defend its foothold in Ukraine amid growing hostility from the authorities.
In September 2017, the Ukrainian Economy Ministry sanctioned EuroChem and other Russian companies for allegedly delivering nitrogen fertilizer to regions of Ukraine currently occupied by Russia.
EuroChem strongly denied this allegation. The company enlisted the accounting firm PwC to carry out an audit of its operations in Ukraine. That audit — and provisions in sales contracts forbidding purchasers from transferring its products to the occupied territories — proves the EuroChem did not make any illegal sales to these regions, a company representative told the Kyiv Post in March.
Then, on March 14, Ukraine’s Cabinet of Ministers announced that it would impose an embargo on the import of fertilizer from Russia.
At the time, Eurochem was preparing a legal case to prove that the sanctions were unfounded, but was facing “strong resistance from the prosecutor’s office,” Igor Shmidt, EuroChem’s head of international relations and communications, told the Kyiv Post at the time.
The company believes that the sanctions and embargo are, in part, politically motivated. The Ukrainian domestic fertilizer market is a monopoly with prices significantly higher than those on the global market.
Ostchem, a group of companies belonging to Ukrainian oligarch Dmytro Firtash, controls upwards of 80 percent of the domestic market for several varieties of mineral fertilizer.
Firtash is currently under house arrest in Vienna, fighting extradition to the United States on bribery charges. But that hasn’t prevented him from advocating for his business interests in Ukraine, according to agricultural economists who spoke to the Kyiv Post as part of a March 2018 investigation into the country’s monopolized fertilizer market.
For years, Firtash has supported the imposition of “anti-dumping duties” on Russian fertilizer imports to Ukraine. Ironically, Russia’s state GazpromBank — connected to the Russian state-owned natural gas giant Gazprom — has also supported the duties. Agricultural economists suggest the reason is that GazpromBank provided the credit that initially allowed Firtash to purchase his four fertilizer factories in Ukraine.
Because Gazprom sells gas — the key ingredient for mineral fertilizer — for low prices in Russia, Russian fertilizer costs significantly less than the Ukrainian product.
As a result, Russian imports “would make competition for (Gazprom’s) de facto own plants in Ukraine,” Maryan Zablotsky, deputy director of the Ukrainian Agrarian Association, told the Kyiv Post in March. “And they wanted to keep the fertilizer prices in Ukraine elevated.”
