Figure 1: Argus’ fertilizer affordability index

The rates are scheduled to increase annually from 2026 until 2028, reaching €315/t for nitrogen-based products and €430/t for the other product groups by July 2028. The legal text also allows for the immediate application of the highest rates if cumulative imports from the targeted countries exceed certain thresholds: 2.7 million tons in 2025-26, 1.8 million tons in 2026-27, or 0.9 million tons in 2027-28.

Affordability concerns

The additional €45/t on urea represents a 9% rise on average European urea prices reported in the first six months of 2025, at a time when fertilizer affordability is steadily declining, mostly caused by a combination of recent geopolitical tensions but also supply tightness across most agri-nutrients. The chart below compares Argus’ price indices for key nitrogen, phosphates, potash fertilizers with price indices for key crops (such as maize, wheat, soybeans, rice):

Supply and trade diversions

It will be interesting to observe how these measures will impact global trade flows in the coming months and years, and in particular how the ripple effect of these changes will impact other prominent urea exporters, including Middle Eastern companies.

The EU imported 4.7 million tons of fertilizers from Russia and Belarus under the affected tariff codes in 2024, accounting for about a third of total imports from non-EU countries for those products. Russia in particular was the EU’s second-largest urea supplier in 2024, providing 1.72 million tons of the estimated 6.2 million tons of total urea imports from non-EU nations. Europe is an attractive premium market for low-cost urea origins traded in the international market, including not only Russia but MENA producers too, in particular Algeria and Egypt.

These trade barriers in the EU market could lead to a decrease in overall Russian fertilizer exports to the EU, particularly as the duties become more punitive over time, and shift more Russian exports towards non-EU markets. The Americas, Turkey, and India seem the most likely candidates, but at the cost of squeezed netbacks in some locations.

Figure 2: Russian urea exports by trade partner

Figure 3: Algeria and Egypt urea exports by destination

Notably, Russian urea has been exempted from the reciprocal tariffs imposed by US President Donald Trump. The imposition of a 10% duty on all seaborne urea exports into the US, with the exception of Russian volumes, might add impetus to this redirection of trade, although the unpredictability of the US administration on trade matters makes the job of forecasting market trends quite complex. The latest US threat to impose steep “secondary” tariffs on Russia further complicates the outlook.

Some of Europe’s other key trade partners for urea might strengthen their position as a result of the tariffs imposed on Russian imports. Algeria and Egypt in particular, both major exporters of urea with a total of 7 million tons exported in 2024, have duty-free access to the EU and favorable freight into the region. In same year, the two countries exported almost half of that volume to non-EU origins, invariably with higher freights. It is reasonable to assume that these two countries would look to place more urea into the EU if a gap in that market materialises (although natural gas shortages that have affected urea production in Egypt in the last couple of years appear likely to persist into the medium term).

At the same time, Nigerian and Central Asian exporters will also face increased competition from Russian urea in their key Latin America/US and Turkish markets, respectively. The EU will be an alternative target, albeit with the 6.5% duty and freight disadvantage for these exporters (partially offset by the 10% duty disadvantage into the US compared with Russia).

The impact of EU import tariffs on Arab Gulf urea exporters

How this might impact Middle Eastern suppliers, in particular those in the GCC, remains to be seen. The Middle East is the largest urea export region globally, shipping approximately 15mn t/yr (excluding Iranian volumes). Middle Eastern producers actively sell to various nitrogen import markets, including India, Brazil, Southeast Asia, and Australia. This broad market reach provides resilience against changes in any single market.

However, based on the factors outlined above, it is possible that Arab Gulf urea producers will see higher competition from Russian tonnages in the Americas, counterbalanced by the amount of additional Egyptian and Algerian tonnage which can be placed in West Europe and possibly even more Nigerian volumes heading there.

East of Suez, Arab Gulf producers are likely to keep enjoying multiple advantages, including proximity to a key import market such as India, established position in Southeast Asia, and unrestricted access to Australia, where urea imports have increased substantially in recent years (an increase that has benefitted Arab Gulf exporters in particular).

Figure 4: Arab Gulf urea exports by destination

Figure 5: Indian urea imports 2020-2025

The Indian market has seen a significant increase in imports from Russia since the start of the Russia-Ukraine war, although Arab Gulf tonnages are still in a dominant position. In 2024, Russian exports accounted for 23% of Indian urea imports, compared with 64% of the total sourced from GCC suppliers. Russian urea is likely to maintain its important role in India, especially in absence of Chinese urea in the Indian market, and Russian producers are still likely to push more tonnage East of Suez and in India in particular, but again at the expense of their netbacks.

In short, European trade policy targeting Russian fertilizers imports is likely to have a ripple effect globally, with Arab Gulf urea producers likely to see some increased competition in specific non-European markets. The Arab Gulf’s strategic position however should provide a certain degree of protection especially East of Suez.

The GPCA Agri-Nutrients Conference is taking place from 29 September to 1 October 2025 at The Ritz Carlton Abu Dhabi, Grand Canal. To secure your spot, visit: gpcachem.org/conferences/anc