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EuroChem withdraws from Ukraine amid restrictions on Russian fertilizer imports

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EuroChem withdraws from Ukraine amid restrictions on Russian fertilizer imports

Fertilizer producer EuroChem Mineral Chemical Co. OJSC is completely withdrawing from the Ukrainian market following moves by the government to restrict imports of fertilizers originating in Russia, the company announced in a May 16 press release.

EuroChem is a Switzerland-based, diversified fertilizers producer controlled by Russian billionaire Andrey Melnichenko and holds significant assets in Russia.

"It has been a tough decision given that we have been active in Ukraine for more than 15 years, almost as long as EuroChem has been in existence," a spokesperson said in an interview May 16. The company had invested about US$20 million in a network of agro-centers in the country over the past three to four years, he noted.

As part of the withdrawal, EuroChem sold its stake in Ukrainian distribution subsidiary Agrocentre EuroChem-Ukraine to the business' former management, the spokesperson confirmed. EuroChem said it would not be disclosing the price or terms of the deal.

The company's decision to withdraw from Ukraine comes in response to government restrictions on the import of fertilizers from abroad. In March, Interfax reported that the Ukrainian government approved a temporary ban on all Russian mineral fertilizers. The government had also targeted EuroChem with sanctions, accusing the company of supplying their products to the separatist regions Donetsk and Luhansk through customs posts that had been closed by the Ukrainian government.

"There have been a number of restrictions introduced against foreign supplies of fertilizers to protect the local monopoly, and that has made trading very difficult for us, and frankly, it has become unrewarding," said the spokesperson, adding that all the discussions the company has had with the Ukrainian government indicate there will be "no discernible improvement" in the situation.

Representatives of agrarian associations in Ukraine have urged President Petro Poroshenko to refrain from sanctioning Russian fertilizer imports to Ukraine. An open letter published on the Ukrainian Agrarian Council's website May 16 warned the Ukrainian government against damaging the country's agricultural sector as Russian imports account for 21.8% of domestic demand for nitrogen-based fertilizers and 77.3% of phosphorus-based fertilizers.

"Given that the agrarian sector accounts for over 13.5% of GDP and 44% of currency earnings, such a scenario could seriously threaten the Ukrainian economy and trigger a new recession," according to the letter.

EuroChem's spokesperson said that as a result of the restrictions, Ukrainian farmers are already paying higher prices for fertilizers.

EuroChem expanded into potash production earlier in 2018, launching output at its Verkhnekamskoe project in Russia's Perm region in March. The company also plans first marketable output at its second Russian potash project, Gremyachinskoe, this summer.

The group aims to boost annual potash output to 4.6 million tonnes over the next four years.