Case Study of Tariffs/Sanctions Enabling New Market Opportunities

Russian fertilizer exports

Today’s meeting by Putin with Andrey Guryev, President of the Russian Association of Fertilizer Manufacturers, provides an excellent example or case study of what to do when normal export channels are blocked by sanctions or distorted by tariffs. It also shows the futility of trying to inhibit a major market player from participation in its global market. The read is rather short and begins now:

V. Putin: Andrey Andreevich, you are the head of the Association of Fertilizer Manufacturers.

A. Guryev: Yes.

V. Putin: How many are there-–29 enterprises, 13 organizations, I think?

A. Guryev: Yes, 110,000 people.

V. Putin: So you know the situation in the industry very well. What is it, according to your assessment?

A. Guryev: Thank you, Vladimir Vladimirovich, first of all, for the meeting. I will allow myself to briefly go through the presentation.

As for the industry, it is a dynamically growing industry. Again, I came to this meeting with a new record: 63 million tons were produced in 2024. In 2025, we plan to produce 65 million tons of mineral fertilizers. This represents a 1.6-fold increase since 2013.

Today, we are the world's second-largest producer of mineral fertilizers after China, but we are also the largest exporter. We currently hold a global market share of around 18-20%. Our goal is to increase this share to 25% by 2030.

Our success is primarily due to the large investments made in recent years. The company implements a huge number of new projects. This is the construction of new plants, one of which you opened at PhosAgro in Volkhov last year, a million-plus [tons] plant. Also, new potash mines are being built and a new plant for nitrogen fertilizers, such as urea, saltpeter, and so on.

Speaking about the growth we have achieved, it is important [to note] that we have grown in both the nitrogen and phosphorus segments, as well as in the potash segment. For example, we have increased our nitrogen approvals by 1.5 times over the past ten years, while our phosphorus approvals have increased by 6.6 million tons, which is almost 1.6 times, and our potash approvals have increased by 1.7 times due to the introduction of new capacities by EuroChem. This growth has been observed across all major types of mineral fertilizers.

V. Putin: Do you have full understanding with the Ministry of Agriculture?

A.Guryev: Yes, we have a full understanding. We are working, we are partners. Of course, the growth of consumption of the Russian agro-industrial complex and also the growth of demand from exports, as we are standing on two feet, and, in principle, this creates a good dynamic moment today for continuing investments. Yes, today is 2025, there are certain issues in terms of economic growth…

V. Putin: As well as crop growth.

A.Guryev: Yes, and the growth of the harvest. But the dynamics are generally good, and I am sure that the result will be very positive.

Speaking about exports, I would like to say a few things here. Indeed, we have been living in quite difficult sanctions and economic conditions for the past three years. And again, we were probably among the first to encounter certain tariff restrictions.

Let's say the United States imposed a compensatory duty on phosphorus, and we were forced to leave. The United States, as a major consumer, also imposed a duty on Chinese and Moroccan products. As a result, they occupied their own market with their own production, which led to the same outcome as any other tariff.

V. Putin: To higher prices.

A. Guryev: To the rise in prices. Our industry was able to reorient to other markets. I want to show, for example, that in India we have grown fourfold – the supply of mineral fertilizers. In Africa…

V. Putin: The Indian leadership asked us about this directly, Prime Minister [Narendra Modi] asked us.

A.Guryev: Yes, we were with Denis Valentinovich [Manturov] just after the meeting at BRICS, which I also attended, and I wanted to report to you that the request of the Indian leadership has been fully fulfilled. Companies have supplied 1 million 200 thousand tons of mineral fertilizers.

V. Putin: Thank you very much.

A.Guryev: We are not afraid of any duties and tariffs, the market is large. The main thing is that we are moving to the BRICS market. Today, the BRICS market is almost 50 percent of the total consumption of mineral fertilizers, and this is a market that will grow.

I would like to return to the current situation and talk about Europe. Europe first limited itself to cheap Russian gas, which led to the shutdown of the gas chemical complex.

V. Putin: Not only–-and glass production… There is a whole chain of negative consequences.

A. Guryev: Yes, there was a whole chain of negative consequences. At the same time, it increased the demand for Russian mineral fertilizers, as they had closed their own.

Today, Brussels is discussing a complete ban on the supply of Russian mineral fertilizers–-the most environmentally friendly, by the way–-to the European market. We understand that a political decision has already been made, and within three years, Europe will completely abandon our fertilizers.

V. Putin: From an economic point of view, from the point of view of the interests of our own agriculture, this is complete nonsense, as far as I understand.

A. Guryev: Yes, it's already difficult to be surprised by anything, to be honest. This will lead to the fact that Europe already has the highest prices in the world for mineral fertilizers, and as a result, the departure of such a large number of products... And we have 30 percent of our imports to Europe, which means that Europe imports 17 million tons, of which 5.5 million tons are Russian mineral fertilizers. Therefore, it is a significant challenge to replace such a large number of products with something new. And of course, the farmer associations are strongly opposed to this. Of course, they understand that logistically...

V.Putin: I understand that this will eventually affect food prices.

A. Guryev: Of course, the rise in prices for mineral fertilizers will eventually lead to a decrease in crop yields. Europe may soon become a net importer of grain rather than a net exporter, perhaps importing Ukrainian grain. Remember how the Black Sea Initiative was developing: grain was supposed to be exported to southern countries.

V. Putin: They went to Europe.

A. Guryev: It turned out to be in Europe, yes. Therefore, in principle, the flywheel has been started, we can already see it. The example of America and the duties showed that the prices of mineral fertilizers can rise by 100, 150 dollars, or, let's say, by 20, 30 percent. And, accordingly, sustainable European farmers will be forced to either reduce their crops or ask for subsidies.

V. Putin: But we need to take physical volumes somewhere.

A. Guryev: Absolutely.

V. Putin: It's not even about the prices–-the number of manufacturers is limited in the world.

A. Guryev: Limited. That is, if we talk about producers, there are... Again, I would say that Russia is the largest, that is, China is the largest producer, but it closes itself. Russia is the largest second producer; we occupy about 18-20 percent of the global market. The next is the Moroccans, of course, for phosphorus. And the Americans and Canadians are phosphorus and potassium, as well as Saudi Arabia.

V. Putin: Potassium fertilizers are also produced in Belarus.

A. Guryev: Yes, and potash fertilizers are from Belarus, of course. Therefore, the relocation of such a large volume will cause, first of all, an increase in prices, primarily for logistics, because it will be necessary to restructure the chains, and, accordingly, all of this will eventually reach the farmer. Moreover, Europeans already have the highest cost of production of mineral fertilizers.

Therefore, we are ready for this, and we have already seen an example of this, so we are actively developing our work with our consumers in the BRICS countries. I have already told you about India.

V. Putin: And is the difference in prices between the domestic market and exports 15%?

A. Guryev: Yes. There are the latest data from Rosstat, that is, in principle, over the past three years since the industry decided to voluntarily fix the prices of mineral fertilizers–-after, remember, the jump that occurred due to a sharp increase in the price of gas. Rosstat says that the difference is 15 percent, and it is still there.

V. Putin: I see. [My Emphasis]

In this specific example, the Russian fertilizer industry already experienced the effects of sanctions and made an initial adjustment while also making further investments to grow its industry to satisfy both domestic and export markets—the domestic market rapidly grew after 2013-14 with the initial rounds of sanctions. China as explained consumes its world leading production domestically leaving Russia as the top exporter. It’s not explained why India needed to get such a massive infusion of fertilizer, but whatever the reason it appears India’s demand will remain very strong. And then there’s commerce with the rest of BRICS, EAEU and SCO nations. Of course, it’s proving very helpful for the Europeans to adopt such a damaging policy to itself. IMO, the key is that the leaders of the industry knew where to look for new market outlets—there was no panic. That same confidence is seen with Chinese and other Asian exporters regarding the American market. Many economists have made the point that a nation might suffer a loss of export revenues for maybe 18-24 months while new markets are cultivated until normality returns. Meanwhile, if the product(s) being exported have no close substitutes, they will continue to be exported albeit in lower volumes—unless the tariff wall is very high: 100%+ as is being threatened by the Graham bill that’s been tabled in the Senate. The segment of today’s Wolff/Hudson chat following Mr. Ford’s explanation of why American autos aren’t competitive expounds on this reality. And although this item is from last year, it’s clear the Outlaw US Empire is dependent on Russian fertilizers too even if the monetary amount doesn’t seem massive.

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