Add one more critical shortage to the world's swollen list. Countries for months have been hoarding fertilizer—and now they are weaponizing it, making sales in return for geopolitical favors.
Last July, China's National Development and Reform Commission stopped major companies from exporting fertilizer. In September, Beijing imposed a prohibition on exports of phosphates, a primary fertilizer ingredient, until at least the middle of this year. In October, Chinese officials added inspection requirements to aid enforcement of the bans. The moves were a reaction to rising prices in China and elsewhere.
China's fertilizer bans created shortages. The country's traditional customers had to search the world for alternate supply, eventually depleting other sources. "The ripple effect is that the entire world trade balance goes down, and there's just not enough out there to go around," said Josh Linville, director of fertilizer for StoneX, to Progressive Farmer.
India, for its part, blocked exports of urea—also fertilizer.
Export bans, unless short-lived, generally violate World Trade Organization rules. Beijing gets around the prohibition on export prohibitions by calling its measures "temporary."
China then figured out that it could dole out fertilizer in return for favors. It has, despite its export bans, been selling small amounts to the Philippines, which Beijing hopes to wean away from the U.S. Chinese officials are now holding out the prospect of bigger sales to Manila.
India is now wielding urea like a dagger against its Chinese foe. In the middle of last month, New Delhi confirmed it would sell Sri Lanka 65,000 metric tons of the fertilizer.
India's urea allows Sri Lankan farmers to plant in the May-August season and arrives at a time of critical need. The country was spending about $400 million annually to import fertilizer, but had not been able to make purchases recently due to the lack of foreign exchange. The government in March 2021 banned chemical fertilizer to conserve depleted currency reserves.
India's sale relieved severe pressure on the embattled Sri Lankan government of President Gotabaya Rajapaksa. The politically dominant Rajapaksa clan had borrowed heavily from Beijing for misconceived ventures scattered throughout the country. China extended around 17% of the country's total debt, although some believe that figure is higher. Whatever the percentage, Sri Lanka, just off India's southeast coast, was becoming extraordinarily dependent on Beijing.
In April, the Sri Lankan government declared a suspension of repayment of foreign debt. The BBC reports that the country's first default since independence is "largely because it cannot service loans from China that paid for massive infrastructure projects." Beijing has now lost clout largely because India used its urea sale to diminish Chinese influence.
Trade experts are becoming worried about export bans. The World Trade Organization, as a part of the so-called "Geneva Package," last week took action to make sure that countries would no longer refuse to sell food to the UN's World Food Program and would not generally restrict food exports. Egypt, India, and Sri Lanka, however, have made it clear they are against any rule forcing them to sell food. The disagreement inside the 164-member body highlights the intense global scramble for wheat, corn, rice, and other staples.
There is no mystery why food is now becoming scarce. Russia's war against Ukraine led to the blockage of Black Sea ports, transit points for grains from the "breadbasket of Europe." Moreover, sanctions imposed on Moscow disrupt trade in food and fertilizer. Before the February invasion, Russia and Ukraine accounted for 29% of the world's wheat exports. "War is tipping a fragile world towards mass hunger," The Economist proclaimed in an article aptly titled "The Coming Food Catastrophe."
Yet war is not the only factor. There is also the worst drought in America's West in 1,200 years; China's declining food self-sufficiency; and civil wars and crises, some raging for decades, especially in sub-Saharan Africa and the Middle East.
As a result, countries are now adopting export bans on food. India, Egypt, Kazakhstan, Kosovo, Serbia, Russia, and Ukraine have prohibited wheat exports. According to the International Food Policy Research Institute, 14 countries have stopped the export of foodstuffs since the beginning of the war in Eastern Europe.
Washington, D.C.-based trade expert Alan Tonelson tells Newsweek that we are witnessing the deglobalization of food. As he points out, the Biden administration may keep Russian sanctions in place even after the war ends—and countries might in any event reduce food dependence on the aggressive Vladimir Putin. "Some Balkanization of the global food supply system looks likely," Tonelson, who blogs at "RealityChek," notes.
Yes, countries, in our era of deglobalization, have just found new weapons: food and fertilizer.
Gordon G. Chang is the author of The Coming Collapse of China. Follow him on Twitter: @GordonGChang.
The views expressed in this article are the writer's own.