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EU Ends Ukraine Crop Import Ban, Heightening Trade Tensions

(Bloomberg) -- The European Union is ending a ban on Ukrainian crop imports in five of its eastern countries in a move that prompted Poland and Hungary to announce a return to unilateral restrictions.

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The bloc will allow the measure — which applies to Poland, Hungary, Romania, Bulgaria and Slovakia — to expire as scheduled on Friday, it said in a news release, adding that the market distortions have disappeared. The limited ban was established after several EU nations slapped restrictions on Ukrainian produce earlier in the year, as farmers complained a supply glut was lowering local prices.

Ukraine has agreed to introduce legal steps, such as an export licensing system, within 30 days to avoid grain surges, the EU said. The bloc also said it would monitor the market.

“What’s important right now is that all countries work in spirit of compromise, engage constructively and we are finding a solution,” European Commission Vice President Valdis Dombrovskis told reporters in Spain Friday evening. “Best of course will be for member states to refrain from unilateral measures and work along the lines of this agreement.”

While expiration of the ban may improve relations between Brussels and Kyiv, it’s likely to cause friction between Ukraine and its western neighbors as Russia’s war in the country drags on. Poland pledged to extend its own ban if the EU let the measure lapse — a step Ukraine has warned would trigger a complaint at the World Trade Organization.

“The EU’s decision is a bittersweet gift for us,” Polish Prime Minister Mateusz Morawiecki said at an election campaign event in Elk, in northern Poland. “I would prefer that they extended the ban, but they didn’t do it. Now we will extend it ourselves despite lack of their agreement.”

Morawiecki, who is running for re-election, added, “We will do it because it’s in the interest of a Polish farmer.”

Hungary also moved quickly to re-impose and widen restrictions on Ukrainian agricultural products. Prime Minister Viktor Orban on Friday signed an executive order that bars Ukraine from selling 24 products including wine, beef, corn, sunflower seed and barley. The previous restrictions applied only to four products.

The restrictions don’t apply to Ukrainian products that are in transit to third countries as long as they leave Hungary within 15 days.

Russia’s exit in July from a deal to allow Ukrainian grain exports via the Black Sea has created additional pressure. Agriculture is a vital component of Ukraine’s economy, and its farmers are now looking to clear harvests. Much of Ukraine’s crop exports are currently shipped via the Danube River, and it also relies on rail and truck routes into the EU.

--With assistance from Maciej Martewicz, Lyubov Pronina and Alonso Soto.

(Updates with Hungary move starting in first paragraph)

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