Russia Considers Export Duties on All Types of Fertilizers

According to Kommersant (The Businessman newspaper), the Russian government is considering imposing export duties on all categories of fertilizers. Although the Agriculture Ministry has previously requested such measures, the chemical industry has so far managed to avoid them. This time, the Ministry of Finance aims to collect over 100 billion rubles from the sector within the year. However, this move threatens to strip companies of up to 12% of their export revenue, further complicating the implementation of investment projects that are already in question due to sanctions and logistics issues.

Policy Developments and Internal Discussions

Sources told Kommersant that the Ministry of Finance has proposed the introduction of these duties. While a substantive decision appears to have been made, the government is currently discussing the specific rate, which is being calculated under the supervision of Deputy Finance Minister Alexei Sazanov.

It is reported that the issue was discussed at a meeting with First Deputy Prime Minister Andrei Belousov. The offices of the First Deputy Prime Minister, as well as the Ministries of Finance, Industry and Trade, and Agriculture, declined to comment on the information. Notably, the Ministry of Economic Development stated that it has not yet received a formal proposal from the Finance Ministry. A representative explained that once a substantive proposal is received, it will be discussed within the relevant inter-agency committee, ensuring the participation of all concerned departments, including Industry and Trade and Agriculture. Sources noted that the matter has not been discussed with market participants.

Financial Targets and Implementation

Kommersant's interlocutors indicated that the government generally plans to collect approximately 105 billion rubles from the chemical industry this year.

To avoid coordination issues within the EAEU (Eurasian Economic Union), the decision on export duties will likely be issued as a government decree valid for six months (the maximum duration for a unilateral tariff without EAEU coordination). The calculation is based on an exchange rate of 60 rubles to the dollar, which is significantly more favorable than the budget's forecast level of 69 rubles to the dollar.

Additionally, Kommersant's sources noted that officials are considering the option of establishing a single rate for all types of fertilizers. However, some industry insiders believe this will be difficult to implement, given the significant differences in supply prices between nitrogen, phosphorus, and complex fertilizers, as well as variations in offers from different countries.

Industry Impact and Expert Analysis

Industry sources emphasized that the Ministry of Finance based its assessment on companies' financial statements according to RAS (Russian Accounting Standards), failing to account for the sharp increase in logistics costs, the freezing of funds at many companies, the negative impact of exchange rate differences, and the volume of goods stuck in transit. In this context, sources guarantee that the largest industry players will be forced to cut back on their remaining investment projects.

Nina Adamova, an analyst at Gazprombank, estimates that this new financial burden could account for 8-12% of the chemical industry's expected export revenue this year. Experts noted that the specific figures will depend on the results of the second half of the year. Boris Sinitsyn, Head of Resource Sector Analysis at Renaissance Capital, pointed out that in 2021, collections amounted to 11% of fertilizer producers' export revenue, and in 2022, this figure could reach 8-9% due to prices rising to historic highs. However, experts believe that if fertilizer prices "normalize," the duties could lead to a 20% drop in producers' net profit.

Background Context

Since the beginning of this year, the Russian government has already imposed restrictions on the export of nitrogen and nitrogen-containing fertilizers. Export quotas will almost certainly be extended into the following year.