5 days ago
How a fertiliser crunch made Europe's defence industry more vulnerable
What do a 155mm artillery shell and a field of sprouting wheat have in common? Ammonia.
A key ingredient in fertiliser production, ammonia, also sits at the core of modern explosives.
EU farmers and fertiliser producers know all too well the steep cost of ammonia, which has become more expensive to produce in Europe since the energy crisis that followed Russia's full-scale invasion of Ukraine.
But in the defence sector, a quieter dependency is taking shape, with weapons producers relying heavily on foreign imports of ammonia – a potential vulnerability in a world plagued by geopolitical uncertainties.
Russia has traditionally been one of the EU's main ammonia suppliers – and Russian food, fertilisers, and raw ammonia have been exempted from EU wartime sanctions to avoid jeopardising global food security.
Around 80% of ammonia worldwide is used in fertilisers, while military uses account for only about 3%, according to Stephen Jackson, CEO of Ammonia Europe. But ammonia's role in the defence sector is critical as an essential ingredient in nitric acid, a chemical used in explosives, gunpowder, and rocket fuel.
Both nitric acid and ammonia for fertilisers are typically produced at the same plants. In Europe, these facilities are mainly located in Germany, Poland, Norway, and Spain, according to Jackson.
This means that when fertiliser production slumps, the ripples can be felt across other sectors. Many ammonia plants are now either shutting down, reducing their production capacity, or relying on imported ammonia, since manufacturing relies on natural gas as a key feedstock. The sharp rise in natural gas prices in Europe means that ammonia is now largely produced in Russia and the United States, where prices are much lower.
"If you couple the really high gas cost with ageing plants, it basically just makes ammonia really, really expensive to produce in Europe," said Lizzy Lancaster, a senior ammonia reporter at Argus Media. The situation has been exacerbated by the war in Ukraine and the loss of cheap Russian gas, she added.
The EU's 2022 fertiliser crunch – following the Russian invasion of Ukraine and skyrocketing energy prices – was in reality an ammonia crisis. That summer, manufacturers slashed output by as much as 70%.
Although the industry has since recovered some capacity, the crisis still marked the beginning of the end for made-in-the-EU ammonia, as high production costs make it uncompetitive compared to imports.
In February, the CEO of German agro-chem giant BASF, Markus Kamieth, warned that in the future 'ammonia would no longer be produced in Europe but imported'. The company had previously announced the closure of some of its ammonia plants. Similarly, Norwegian fertiliser producer Yara confirmed plans to shut the last ammonia facility in the United Kingdom, after previously closing its plant in the Belgian town of Tertre. Bad news for food, and explosives This isn't just bad news for agriculture; it's a growing problem for Europe's arms makers.
'For nitric acid, we need fertilizer producers. Today, we rely heavily on Russian producers,' Thierry Francou, CEO of French gunpowder giant Eurenco, told Euractiv.
Since the 2022 invasion, European fertiliser producers have complained of unfair competition, arguing that Russian imports – made with cheap, state-subsidised gas – were flooding the EU market and undercutting domestic production.
Francou echoed that criticism, complaining that Russian fertilisers had been imported into the EU "without any trade barriers".
Although ammonia is exempt from sanctions, the EU has made moves to reduce imports from Russia by hiking tariffs and seeking alternative suppliers.
It wasn't until July this year that the EU imposed import duties on Russian nitrogenous fertilisers, which includes ammonia-based products – a move a Yara spokesperson described as 'too little, too late'.
In a parallel issue, a Bloomberg investigation revealed in March that Russian explosive-makers used Russian-owned fertiliser firms operating in Europe to maintain supplies of nitric acid for the war effort, exploiting carve-outs in EU sanctions meant to protect food security. Defence ramp-up The European Commission has been pushing ahead with plans to scale up Europe's defence industry through a battery of programmes, from the recently approved €150 billion SAFE military procurement loan programme to the €1.5 billion European Defence Industry Programme (EDIP) aimed at revamping Europe's military industrial base, which remains under negotiation.
But key upstream materials – like ammonia and nitric acid – aren't always part of the conversation.
Defence industry leaders like Francou argue that the ramp-up won't happen without reviving Europe's chemical base. He also blamed EU environmental regulation for slowing the sector down.
Earlier this year, Eurenco reopened a long-dormant gunpowder production line in the French town of Bergerac. To meet the surge in orders, Francou said his company plans on increasing gunpowder production on the site to 1,200 tonnes a year, which will gradually ramp up to 1,800 tonnes a year.
Increasing production capacity of gunpowder is at the heart of Europe's strategy to secure critical materials for defence. When visiting the site in 2024, French President Emmanuel Macron said the relocation was part of France's "war economy", at a time of a 'geopolitical, geostrategic shift in which the defence industry will play a growing role'.
For Francou however, keeping Europe's chemical industry alive should also be at the centre of that strategic shift. 'Without a chemical industry, we don't have the capacity to make gunpowder,' he told Euractiv.
Jackson added that 'whatever dependencies are being felt by the agricultural sector, the same is true for defence'.
The Commission has taken some initial steps to tackle the issue. In July, it named ammonia an "essential" chemical for the EU economy in its European Chemicals Industry Action Plan to boost the EU's production of chemicals.
'We welcome the fact that for once we are recognised as essential,' said Jackson. From Moscow to Louisiana But the plans fall short of reviving the EU's fertiliser industry, which remains hampered by high gas prices. Market watchers like Lancaster predict that Europe will need to double ammonia imports in the next five years.
'The US will become a bigger and bigger supplier to Europe, because there's more capacity there ... and there's really cheap natural gas,' said Lancaster.
Currently, US-produced ammonia faces EU tariffs of 5.5%, but the bloc could scrap levies as part of the trade deal struck between Brussels and Washington on 27 July. Last week, a senior EU official said that Brussels would reduce tariffs on some US fertilisers to zero in order to replace Russian imports, but did not specify whether this would include ammonia.
Even with tariffs, the US has emerged as a top ammonia supplier as Russian imports are phased out. Imports of American-made ammonia jumped from 17,800 tonnes in 2019 to 141,800 tonnes in 2024.
Other suppliers include Trinidad and Tobago, Egypt – where the EU is working to strengthen ties – and Algeria.
But whilst global markets offer short-term flexibility, political shifts can trigger supply shocks that ripple across both food and defence supply chains. And the tensions created by Trump's adversarial trade tactics have highlighted the EU's exposure to such shocks.
'Not only will we be dependent on Russia – we'll be dependent on Trump,' warned Antoine Hoxha, director general of Fertilisers Europe.
Reducing this dependency should be the priority, says Ammonia Europe's Jackson. 'We need to continue producing it in Europe, it is strategic, and we can't rely on external partners for defence, food, or clean fuels.'
(adm, bst, ow)
