Jens Peter Klausen, CEO of Danish whitefish trader JP Klausen & Co., which is owned by Japan’s Nissui Corp., said there are growing signs that the European Union (EU) will impose a complete, partial or phased ban on direct and indirect seafood imports from Russia, worth an estimated $1.65 billion.

The European Commission (EC) will continue to discuss new trade sanctions against Russia, including a possible ban on imports of certain types of fish from Russia, after this summer. Previously, on 1 January, the EC removed fish products from Russia from the 0% Autonomous Tariff Quota (ATQ) system.

Pollock fillets are the largest product sourced directly from Russia or after processing in China. They are currently subject to a 13.7% tariff when imported into countries outside the ATQ import system.

Leaders from Canada, France, Germany, Italy, Japan, the United Kingdom and the United States have voiced concerns about Russia's unsustainable and unfair trade practices in fish and seafood products.

The European seafood processing industry is facing many risks. In 2023, Russia exported $955 million worth of seafood to Europe for further processing, with pollock and cod fillets accounting for the largest proportions. In addition, China also imported at least $699 million worth of Russian seafood, including cod, haddock, pollock and headed and gutted (H&G) Pacific salmon.

Over the past year, there have been rumors that the EU will increase sanctions on imports from Russia. This will affect Mr. Klausen's company JP Klausen in 2023, when imports of pollock from Russia will be affected.

Mr. Klausen, a member of the Danish Seafood Association, part of the EU's AIPCE-CEP, said the ban would have a serious impact on the industry.

In late 2023, the United States announced a complete ban on Russian seafood, even if processed in third countries such as China. The ban took effect on June 1, after being extended from its original February 21 date. The United States banned direct imports of Russian seafood in 2022 after the Russia-Ukraine war broke out.

The US ban has caused the cost and freight (CFR) spread of H&G Atlantic cod from Russia and Norway to hit a record high in China.

If the EU takes further action, it is unclear whether it will be through direct or indirect imports.

Klausen said the EU could adopt a phased approach, with direct imports first, followed by double-freezing via China. Large processors in the industry could be given some time to adjust their operations, rather than imposing a blanket ban.

Many in the industry do not see a blanket ban as the pollock industry still relies on single and double-frozen fillet blocks from Russia.

Many in the industry believe that a complete ban on Russian cod would be too disruptive for businesses to adjust their operations, while others say it has to happen. Ultimately, it will be politicians who make that decision, not the industry. However, it is unclear whether political leaders will decide to impose a blanket ban or just phased restrictions.

Klausen said that politicians would be more likely to ban Russian cod if a large number of European buyers expressed a desire to stop using the product. This would give them a stronger case, although they are aware that it would have serious consequences for the seafood industry.

More than $1.6 billion is at stake

It is estimated that more than $1.6 billion in seafood trade could be affected if the EU imposes new sanctions on Russia. However, Klausen said that rumors of further EU actions have not disrupted current trade.

In fact, in May 2024, Russia remained the main supplier of tuna fillets to Germany, with 3,805 tonnes of the product at the lowest average price of $2,641/t.

Meanwhile, the United States ranked second, with imports from the United States reaching 3,206 tonnes at an average price of $3,377/t. Germany became the main supplier in 2024, after reaching a record import level in December 2023, surpassing Russia's exclusion from the EU ATQ.

In week 28 (08-14/07/2024), according to EUMOFA data, the average import price of Russian pollock fillets was USD 2.39/kg, lower than that of China (USD 2.47/kg) and the US (USD 3.79/kg).

The total direct and indirect fish imports from Russia into the EU 27 are estimated at USD 1.65 billion in 2023, including USD 955 million direct imports and USD 699 million imports via China.

The top four products in the total direct import value of USD 955 million are pollock, cod, Pacific salmon and haddock.

Frozen pollock fillets are the main item, with 70,587 tonnes imported in 2023, worth USD 264 million. Frozen cod fillets are second, with 22,662 tonnes imported, worth USD 194.55 million.

Indirect fish imports from Russia to the EU via China are estimated at USD 699 million in 2023. For pollock, about 94% of the total 580,535 tonnes imported by China are from Russian sources. This means that of the total 142,470 tonnes of pollock fillets that China exports to the EU, up to 133,921 tonnes of fish from Russia, equivalent to USD 460 million, could be used.

Similarly for cod, 66% of the total 123,964 tonnes of cod raw materials imported by China came from Russia.

For haddock fillets, China imported 61% of raw materials from Russia. Assuming the same ratio for exports, it is estimated that China will export 2,588 tonnes of haddock fillets worth US$19 million to the EU, of which 61%, or 1,579 tonnes worth US$11.59 million, will be from Russia.

Similarly, for Pacific salmon fillets, 59% of China’s raw material imports are from Russia. It is estimated that China will export 11,304 tonnes of Pacific salmon fillets worth US$94 million to the EU, of which 59%, or 6,669 tonnes worth US$55.46 million, will be from Russia.

Finally, applying the 66% rate to all Chinese cod fillet exports to the EU, estimated at US$126 million, or 17,509 tonnes, will be from Russia.

Overall, Russia is an important source of raw fish for China to export to the EU.

Source: VASEP