The Ecuador-Russia Banana Trade Crisis: A Tangle of Diplomacy and Agriculture

2024-02-09

Claiming to have found specimens of the humpback fly and using this sanitary excuse, the Kremlin blocked the entry of the Ecuadorian flagship product, the bananas and carnations, days before Valentine's Day. Ecuador is preparing a response to the measures that Russia has applied by suspending five Ecuadorian banana exporters and restricting the entry of carnations from the Latin American country.

Both measures were applied a few days after Ecuador's president, Daniel Noboa, described as "junk" the obsolete Soviet Union time war equipment he gave to the United States in exchange for receiving new equipment as announced by the press.

The Ministry of Production, Foreign Trade, Investment and Fisheries informed the local media that: "at this time, meetings have been held at the highest level that allow us to take a country's position. As soon as we have an answer, it will be communicated."

Although Russia has indicated that both the suspension and the restriction are due to phytosanitary reasons, these measures have been seen as retaliation for Noboa's comments, especially after Russian Foreign Ministry spokeswoman Maria Zakharova showed the Kremlin's annoyance at Noboa's description of its equipment: "If it were scrap metal, as they call it in Ecuador, it would be difficult for Washington to propose replacing it with modern equipment, by the way, for a fairly high amount. Let's hope Quito understands it that way," the Russian official said. These statements came four days after Noboa's announcement.

The U.S. received the Russian equipment and will deliver new ones to Ecuador. The valuation of the latest equipment is about USD 200 million, according to local media.

Last Friday, Russia's phytosanitary inspection agency (Rosselkhoznadzor) indicated that banana export certificates to five companies will be suspended due to the alleged presence of humpback flies in shipments arriving in Russia.

The measures adopted by the Russian authorities would considerably affect Ecuadorian exporters and, therefore, the government's profits from these products. Ecuador is the world's largest exporter of bananas. In 2023 alone, it exported 6.5 million tons. After only the European Union, Russia is the second most crucial buyer of Ecuadorian bananas, with a share of almost 23%.

The Ecuadorian Federation of Exporters (Fedexpor) ratified "that the products of the Ecuadorian exportable offer meet the sanitary and phytosanitary quality standards required by our destination markets" and added that the associated unions are closely monitoring the trade situation with Russia: "We will maintain a thorough evaluation of this situation. At the same time, we are in direct contact with the national authorities, so that it is possible to clarify the strict compliance with the requirements that Ecuador grants in phytosanitary matters to the products that are sent to all markets," the association said in a statement.

Ecuador is the world's leading exporter of bananas, with more than 6.5 million tons in 2023, according to statistics from the Association of Banana Exporters of Ecuador (AEBE).

Of this volume, Russia is the second largest destination market for Ecuadorian banana exports, with 1.37 million tons in 2023, equivalent to 22.85% of the total, second only to the European Union (EU).

Between January and November 2023, banana exports amounted to US$3,255 million, of which US$690 million were for shipments to Russia, which has Ecuador as practically its only foreign banana supplier, accounting for 98% of its banana imports. Russian media also announced that the country would be sourcing bananas from countries other than Ecuador.

In 2023, Russia imported 2,800 tons of bananas from China, 4,800 tons from Korea, 29 tons from Egypt and 2 tons from Thailand and plans to increase supplies from these countries in the future, the Russian agricultural watchdog told TASS.

In January 2024, India sent the first batch of bananas to Russia, and supplies from that country will also increase. According to the UN Food and Agriculture Organization (FAO), India is the world's largest banana producer, China is second, and Indonesia is third.

The regulator noted that Russia did not import bananas from Indonesia in 2023. Russian media also reported that since January, the country has started importing bananas from India without specifying the volumes and intends to increase imports from the Asian country.

Late in the week, Vladivostok-based shipping and logistics company FESCO also said they were ready to ship bananas from India and Vietnam to Russia by substituting them from Ecuador. However, the project needs to be more credible.

According to market watchers, the mentioned Asian countries could only substitute the volumes of bananas from Ecuador and the quality. Ecuadorian bananas are considered the best in the international markets.

There were recent rumours that at least two of the largest Russian supermarkets sourcing bananas from Ecuador have been looking at the possibility of buying from European traders who source their bananas in Colombia in a swap for the bananas from Ecuador that they might supply to the Europeans.

On February 8, there was news informing that there were at least 300 reefer TEUS at the port of St. Petersburg, which could not be delivered due to the ban. The importers were reportedly told to fumigate the banana cargo or take the containers back to the loading ports. At least another 400 containers are expected to arrive soon, and similar quantities might arrive for at least two more weeks while en route to the Baltic port.

According to industry sources, the reefer vessels employed in the weekly service from Ecuador to St Petersburg have been loading regularly.