Ukrainian grain export deal with Poland saved for now – what next?

A Polish perspective on an EU issue

Ukrainian grain deal and agreements on grain transit through Poland, Hungary, Romania and Slovakia were meant to save Ukrainian agriculture. However, tonnes of this agriculture production, much cheaper than in the West, were being sold on local markets, dealing a blow to local producers. To save them and not to lose their votes, Central European governments temporarily banned all imports, opening another dispute with the European Commission which claims that such moves are unacceptable. While a renewed agreement between Ukraine and Poland came to being on 18 April, there are legitimate questions on how long it would be satysfying for both sides. 

Who profits from Ukrainian grain? How did the grain which was to be exported to North Africa actually come to be sold in Poland? And how will the whole issue be exploited in the electoral campaigns, which have in fact started already in Poland? In another peer-to-peer Cross-Border Talk, Vladimir Mitev asks Małgorzata Kulbaczewska-Figat.

See the transcript of the talk below the video.

Welcome to a special discussion on Cross-border Talks in a peer-to-peer format between me and Malgorzata Kulbaczewska. It is the 20th of April 2023, and we are going to talk on the agricultural imports from Ukraine and the attitude of the countries in the eastern part of the EU towards them. A number of countries of the region, such as Poland, Slovakia, Hungary and Bulgaria, banned the imports of Ukrainian agricultural products, claiming that their own local agricultural producers can’t sell their stuff and can’t make profits. For the time being, the transit of Ukrainian agricultural products will be allowed as agricultural products are a big part of Ukrainian exports. And now we are on to the situation in Poland with Malgorzata Kulbaczewska. My first question is what is happening right now? What is the latest news regarding this issue from the Polish side?

Hello, Vladimir. Thank you for recording this extra talk between the two of us. And indeed the agricultural production of Ukraine is now the main topic discussed in Polish political debate. Two days ago we reached a conclusion, an agreement with the Ukrainian side, which basically permits transit of Ukrainian agricultural productions through Polish territory, but not selling the products here. Basically the products covered by the agreement are grains, vegetables, fruits, all kinds of dairy and meat products as well as sugar. All this stuff was imported to Poland last year after the agreement of Ukrainian grain export. It was supposed to be sold abroad outside the European Union. But instead, a lot of this production actually stayed in Poland and was bought by Polish companies or by foreign owned companies operating in Poland. As a result, Polish production of wheat became increasingly unaffordable as one tonne of wheat is now about 20 to 25% cheaper in purchase points. It is very bad news for Polish agricultural producers who sell some of the grain just now and  who want to acquire capital for spring works and investment in this season. Also, Polish customers are worried about the quality of Ukrainian grain, which, apparently, is not controlled anyhow. Nobody checks, for instance, whether the production could contain heavy metal elements, which is not impossible if the grain comes from a war zone. And as we know, all the territory of Ukraine has been attacked, and has been bombed by Russia. So in fact, there are no safe locations in the territory of Ukraine. If the wheat is to be offered to you, to EU customers, then it should undergo the checks, which is not happening.

 According to agriculture organizations in Poland, at least 4 million tons of grain entered Polish territory since the beginning of war, and a significant part of that was sold here instead of being exported. Further, we were told that this grain is to save North Africa and other parts of the global South from the hunger catastrophe. In fact, a big percentage of this grain entered the European market. It was simply sold there as a cheaper product according to the best or worst principles of capitalism. So the issue of Polish agricultural production and the problems that the Polish agriculture producers started to have in connection with the Ukrainian grain import were important for the Polish government, as the village voters, the voters from the countryside are crucial for the victory that the government would like to have in the elections that are scheduled for this autumn. So on 30th March, the Polish government reached a temporary agreement with agricultural producers in Poland, promising them to pay extra for every tonne of wheat sold in Poland if the price is not satisfactory, but also to work to have the tariffs on Ukrainian grain reinstalled on the European level, which – I can elaborate on this later – sounds quite realistic. Then the Polish government declared a total ban on Ukrainian agricultural imports, no matter whether it was to be transited or sold here. And two days ago there was an agreement reached with the Ukrainian side which basically says that import for the sale in the European Union is not OK, but transit will be put back to work. 

Now, the Polish side claims that the agricultural production in Poland is safe because all the transited products will be put into the SENT system. This is an international system that allows us to monitor the goods that are being sold and sent. So no Ukrainian agricultural production will enter Polish territory to be sold here. Everything is supposed to be exported outside of the community. The Ukrainian state is happy because the agriculture export accounts now, according to some analysts, to as much as 70% of all Ukrainian exports. Getting paid for this production is essential for the Ukrainian war effort. The Polish government also seems calm at the moment as the agriculture producers have been called down. The question is for how long this agreement will last.

There are a number of sides and a number of dimensions of this conflict. For example, Ukraine is at war and it looks like the European Commission and the European Union in general wants to support the Ukrainian economy in these conditions. And you mentioned that agriculture is a big part of the Ukrainian export. On the other hand, we have had rising prices in the EU over the last year and maybe cheaper agricultural products allow for cheaper food prices, at least in some cases. And on the other side, there are the producers, which every country of our region and every government of our region wants to protect. So who has the right in this situation? Who has most of the right?

Vladimir, It is a tricky question and you know that if I say who is right and who is not, it can also put me in the pro-government or anti-government camp in Poland. Nevertheless, I will try to elaborate what arguments each side presents as in fact, everybody has some right behind his position. As Mykola Solsky, who is the minister of agriculture in the Ukrainian government, put it, Ukraine understands that Polish agriculture producers are in a tough situation, but the Ukrainian  producers are even in a more difficult position. Then he quoted statistics that show that a lot of Ukrainian agricultural land was in fact excluded from any works because of the war, because of the bombings, because of the invasion. And as I said, agriculture export is crucial. It’s vital now for the Ukrainian war effort so we can understand the Ukrainian side that wants to keep the grain flowing and wants to have the grain sold. 

On the other hand, on the side of Polish government… I can also understand that they want to protect the domestic production. However, we need to be honest and say that some of the moves on the Polish side, or rather some of the things that were not done on the Polish side, have actually worsened the situation. Let me just say that from the very beginning, the wheat was supposed to be transited only through Poland and other states. In Central Europe, however, nobody controlled whether it is an actual transit taking place and nobody controlled which companies might be buying grain here in Poland. Nobody tried to stop them from doing that. And according to a journalist investigation that was published by Wirtualna Polska news site last week, there were at least 20 companies, some of them Polish owned, some other Ukraine owned and some other with German and Lithuanian owners who were buying grain here in Poland, the Ukrainian grain. And we are speaking about huge money, huge dimensions of production, huge volumes of grain being consumed here or being processed to get animal food, as most of these companies are actually active in meat production – and the meat prices did not fall. So we see that a lot of entities were making a great business with this cheap Ukrainian grain coming and the good of the hungry people of Northern Africa, which was so emphasized when when the grain agreement was first introduced, really was in the very last place here. 

And when I am speaking about good business, I think that I need to mention the European Union as well, because in 2021, the European Union, all 28% of all European spending on grain went to Ukraine. It was about money spent on buying agricultural production from Ukraine. There are states in the EU like the Netherlands or like Spain, who are among Ukraine’s top customers in this area. They would not want tariffs reinstalled. They want to get cheap products from Ukraine, especially that Ukraine is mainly the exporter of the non processed products and that some of these Ukrainian grains then actually comes back to Ukraine in the forms of pastry, cakes and all this kind of stuff, and Ukraine actually pays for that much more. So a good, great business is going on on many levels. And I can’t really blame the Polish government for standing up here and trying to protect agricultural production here in Poland especially. People from the countryside are important voters for the Law and Justice Party.

This situation strengthens the so-called sovereignist tendency in a number of countries in our region, because once again, there is this rhetoric that Western European politicians or leaders don’t understand our specifics and our poverty or our difficulties. Our interests as well are not taken into account according to some of these sovereignist people. So what do you expect to happen in the near future regarding the situation? What will be the final results, both in terms of rules and trade and in politics?

First of all, I would say that I am happy that the transit agreement was signed by the Polish and Ukrainian side. If it is really happening, I mean, if Ukrainian grain is really exported, then everybody should be satisfied. Polan, because we are supporting Ukraine. Ukrainians, because they get funds for their war effort. Also the food production is put to the market. The problem is that I am very afraid that this agreement will not last long and that new tensions will reappear. The problem is that Poland has actually no infrastructure to cope with such great volumes of export.

According to former Agriculture minister of Poland, Marek Savitski, politician of the Polish Peasants Party, Poland produces about 35 tons of wheat per year. We are now speaking about Polish domestic productions. Less than 30 tons, 29 is consumed here, so there are six tons, six, 6 million tons left for export. If we have to export this and 4 million tons more from Ukraine, we don’t have stores, we don’t have infrastructure for that. We haven’t built it since the first agriculture agreement with Ukraine was set. Perhaps we should also ask why it was not done. Perhaps we should also ask why nobody in Ukraine, nobody from the Ukrainian companies had another agreement with Poland to help to develop the infrastructure. We are not speaking here about little Ukrainian farmers who make great efforts to make ends meet. This agriculture production from Ukraine is coming from huge companies as well.

 And the other question you asked me about you asked me about sovereignism and whether the question of grain would not be exploited in political campaigns in Poland. Well, it already is. And if the problems reappear and as I said, I expect them sadly to reappear, then we can expect even two kinds of sovereignist discourse to be strengthened, one coming from the Law and Justice Party and another kind coming from Konfederacja or Confederation, the far right party which is now rising to be the third political force in Poland. We can expect that Law and Justice as it was already done, will try to cover the question of Polish companies or companies operating in Poland, having actually profited from the grain. But instead they will focus on the actions of the European Union, on the position of the European Union, on the question of tariffs. And yes, they will say basically what you have just said, Vladimir, that the European Union does not take our interest into account. They don’t understand our specifics. They impose politics which is profitable for them and not for Central Europe etc.

The second discourse coming from Konfederacja will be even more dangerous because it will be purely nationalist and anti-Ukrainian. There are already first signs that this party’s politicians try to say that Ukraine just wants from Poland to support it, to support without offering anything in exchange, and that Poland is actually losing from supporting Ukraine. And here the grain case will be exploited. I am pretty sure of that.

 The other question that is left to be solved in the future is what happens to Ukrainian agriculture if Ukraine takes further steps in European integration? Ukraine is a power in agricultural production. It has great grounds for that. If the war stops, it will be a perfect area to have agricultural production on a scale that is unthinkable in many European countries, including Poland. What happens then? Is the European Union so willing to see the agriculture in the whole community, let’s say, restructuring because of Ukrainian grain being the part of the Common Market permanently? Well, these are the questions that we need to answer in the future, and they will be essential for European integration, for European economy and for all of us.

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