As the leader of the farmers’ organization—in whose favor this decision was reportedly made—put it in this context, “the devil is in the details.” In other words, it is fundamentally important to answer the question: How, by whom, and for what purpose will the licensing mechanism for raw material imports from Ukraine to Moldova be used?
Background
To answer this question, it is important to consider the historical context. Import licensing for Ukrainian agricultural raw materials was first introduced after they flooded the markets of Moldova and Europe as a whole during the 2022/23 season. In response, more or less similar licensing regimes for imports of “sensitive” products from Ukraine were implemented almost simultaneously by the governments of several neighboring countries. In Poland and Romania, the regime was nominally stricter, while in Moldova it was less strict.
In fact, as many market analysts and operators believe, the licensing of Ukrainian imports into Moldova was aimed not so much at “civilized” regulation of grain imports as at effectively blocking sunflower seed shipments from Ukraine—intended for processing by Moldova’s largest oil and fat processing plant. There were several motives behind this decision.
The first motive was that Ukrainian sunflower seeds (an alternative source of cheap raw materials) severely limited the potential for price increases on Moldovan goods. According to the leadership of the “Forța Fermierilor” association, halting this flow “helped prevent a price collapse in the Moldovan agricultural commodities market.”
The second motive was the “human factor.” The owner of one of the largest agri-food holdings reasoned that if an opportunity arose to quickly and relatively inexpensively ensure the fulfillment of his largest enterprise’s raw materials program through just two or three major deals with partners from a neighboring country, then such an opportunity must be seized. Without regard for the opinions of vocal farmers and arrogant officials—both government and party officials.
In turn, one minister saw the licensing regime for Ukrainian raw material imports as an opportunity to appease the farmers (who, for the most part, did not like him) and, at the same time, to demonstrate his importance to the overly independent owner of an agricultural holding, whom the farmers regarded as “nearly a monopolist.”
After the import licensing regime was introduced, according to the manager of Moldova’s largest oil and fat processing plant, the company was unable for several months to obtain licenses promptly—that is, to legalize sunflower seed imports from Ukraine.
Unable to fulfill its raw material procurement plan by “top-loading” its processing facilities with Ukrainian sunflower seeds, the agri-food holding company chose not to purchase expensive Moldovan sunflower seeds for processing. The motivation was not so much a desire to “prove a point” as the assumption that it would be extremely difficult to sell sunflower oil made from expensive sunflower seeds quickly and profitably. This was especially true given that the global market had begun to be flooded with cheap sunflower oil from Ukraine.
As a result, Moldova’s flagship oil and fat industry came to a “technical halt” for nearly a year. Exports of Moldovan sunflower oil plummeted, and revenues from this sector fell by an order of magnitude.
The country lost its reputation as a major and reliable European exporter of this product. Instead, Moldova became a major importer of sunflower oil from Ukraine, Russia, and Romania.
For one marketing season, Moldovan farmers sold sunflower seeds exclusively for export—at the price offered to them by a small circle of major traders.
The minister who set this industry transformation in motion has moved from one high-ranking ministerial post to another. Now he is preparing to rescue the exports of not one, but two countries at once. At a recent meeting with the prime minister, the leader of the most active farmers’ organization remarked in this regard: “We still don’t trust him.”
Current Context
Due to the blockade of commercial shipping in the Black Sea resulting from attacks on ships and port infrastructure, prices for grain and oilseeds in Ukraine are falling. The country’s authorities are persistently seeking opportunities to establish alternative export channels. At the same time, all direct and indirect participants in the agri-food market realize that there is no equivalent alternative to export shipments by sea.
Consequently, on the one hand, Ukrainian commodities will most likely continue to become cheaper. On the other hand, in drought-stricken continental Europe and many other markets, these same raw materials will most likely become more expensive—following the “food Strait of Hormuz” principle.
In this situation, two bills have been introduced in the Ukrainian parliament, both of which—in more or less stringent forms—call for eliminating the 10 percent export duty on soybeans, rapeseed, and sunflower seeds.
Many experts believe that the introduction of this duty allowed Ukraine to sharply increase the processing of oilseeds—especially rapeseed—and the export of vegetable oils last season.
However, it must be assumed that developing domestic processing amid an escalating military conflict is an extremely difficult and risky undertaking. This is all the more so given that one of Ukraine’s largest operators in the oil and fat industry has temporarily suspended its operations due to attacks on the vegetable oil terminal in the port of Odessa.
In contrast, the authors of the aforementioned bills believe that the elimination of export duties on oilseeds will increase the purchase prices offered by export traders to Ukrainian farmers by 8–12%.
The licensing mechanism may work as intended
To summarize the above, we can conclude that there are increasing signs that the Ukrainian authorities will choose the “lesser of two evils.” That is, under the current difficult conditions, they will focus on intensifying raw material exports.
For Moldova, this means increased risks. Consequently, it also makes the reinstatement of import licensing more advisable.
But, returning to the beginning of the article—it makes sense to launch this process specifically as a system of operational monitoring and control, rather than as a filter or barrier. In this case, it will be easier for the prime minister—a proponent of libertarian free-market theory—to accept this forced departure from his principles.
That said, the representative of the farmers’ association is also right—the “devil is in the details.” Import licensing carries the risk of “agent problem”: broad interpretations of authority, abuses, and other self-serving motives.
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