Sat, Oct 07, 2023 page9

• Poland’s grain dispute with Ukraine helps no one but Putin

  • By the editors / Bloomberg Opinion
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  Poland’s military and economic support is indispensable to Ukraine’s defense against Russian aggression. That partnership has been imperiled by the Polish government’s insistence on banning Ukraine’s grain exports, which are essential for the global food supply and for the Ukrainian economy.

  By widening divisions among allies, the dispute is playing directly into Russian President Vladimir Putin’s hands.

  European leaders need to act quickly to resolve it.

  Russia’s blockade of Black Sea shipping routes and its bombing campaigns against ports on the Danube River have forced Ukraine to use slower and more expensive land routes to get vital exports to markets. The EU had waived quotas and tariffs on Ukraine’s foodstuff after Russia’s invasion, but a flood of imports into eastern member states created an uproar from local farmers.

  In May, under pressure from several states, the EU relented and imposed a temporary ban on sales of Ukrainian grains in Bulgaria, Hungary, Poland, Romania and Slovakia.

  Meanwhile, Russia’s own hefty harvest helped drive down wheat prices further.

  When the ban expired last month, the EU resisted calls to extend it, raising the prospect of another spike in imports. The timing was bad for Poland’s ruling Law and Justice Party, which relies heavily on rural votes and faces an election on Sunday next week. It pledged to defy the EU and keep the ban in place, which caused Ukrainian President Volodymyr Zelenskiy to file a complaint with the WTO and question whether Poland’s solidarity with Ukraine was mere “theater.”

  Polish leaders, in turn, have warned Zelenskiy that his rhetoric could jeopardize weapons shipments to Ukraine.

  This spat benefits no one but Putin. Ukraine’s exports are critical to its ability to sustain a war of attrition — that is the rationale behind the EU’s “solidarity lanes” — and the EU was right to want to lift the import ban, which not only hurt Kyiv, but violated the principles of a common market.

  At the same time, Brussels needs to balance support for Ukraine with the interests of member states, even prickly ones with an authoritarian bent.

  The Polish blowback is a sign of how difficult that task would be.

  Poland and Ukraine agreed this week to shift border checks on Ukrainian grain passing through Poland to the Lithuanian port of Klaipeda, which might help to reduce tensions, but the bigger issues remain.

  In the near term, the EU has little choice under the circumstances but to provide more direct subsidies to farmers facing losses from Ukrainian imports. While such transfers risk creating dependencies, the EU has long recognized that economic shocks affect countries differently and has provided “solidarity” funding to cushion the blow. An export licensing system — envisaged by the European Commission and part of a deal that Slovakia cut with Ukraine to end its unilateral ban — might help regulate import flows, although work should be done to ensure that such schemes are not undermined by bureaucracy and corruption.

  Over the longer term, the EU needs to invest to help Poland and others upgrade their lagging transportation and storage facilities. That would alleviate some of the capacity problems that have hurt farmers and help prepare for increased future trade flows as the EU expands. For its part, Poland should remember that continued support for Ukraine serves its own economic and security interests.

  Given Poland’s outsized importance to Ukraine’s defense — and Europe’s own security — a swift, diplomatic resolution of the grain dispute is far preferable to squabbling and threats of litigation. The costs might be high, but the losses would only be greater if allies are pulling in opposite directions.

  The Bloomberg Editorial Board publishes the views of the editors across a range of national and global affairs.
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