The geopolitics of fertiliser

Few questions are as strategically consequential, and as historically persistent, as those that concern the production of fertilisers. Time and again, the supply of usable nitrogen has shaped wars, driven technological breakthroughs, and influenced the map of geopolitical power. The dependencies underpinning that supply chain have never disappeared; they have simply relocated from one source to the next. As the world once again confronts questions of supply chain resilience, that pattern deserves renewed attention.

At the beginning of the 19th century, Alexander von Humboldt recognised the value of seabird guano for European farmers who couldn’t maintain soil fertility and feed the local populations. Plants need nitrogen to grow, but agriculture depletes soil nitrogen because it disrupts the natural cycle whereby plants return nutrients to the soil when they die. Even though nitrogen is widely available in the atmosphere, most organisms cannot use atmospheric nitrogen directly, and depend on fixed forms of nitrogen. As guano was found to be a highly effective fertiliser due to its nitrogen content, its exports from South America – specifically Peru – towards Europe and North America boosted yields, which skyrocketed by the middle of the century. In 1864, a conflict over guano resources broke out in Peru’s Chincha Islands, as Spanish troops occupied the Peruvian Islands in what is now termed the Guano War. The Spaniards were subsequently defeated and retreated, but this marked a first step towards more regional hostilities over this kind of resource. 

Between 1840 and 1870, Peru exported around 12 million tons of guano, transforming the national economy. Guano was the Latin American nation’s single most important source of income. By the end of the century, however, the reserves were depleted due to unsustainable extraction practices. This turned the attention towards the Atacama Desert in Chile, endowed with sodium nitrate, a valuable mineral resource that can also be used as fertiliser. In 1879, war broke out between Chile, Bolivia and Peru. This War of the Pacific was motivated by the desire to control a part of the Atacama and its sodium nitrate, also known as Chile saltpetre – a natural compound crucial for agriculture and food preservation, as well as warfare. 

After it was discovered in the early 19th century in northern Chilean mineral deposits, saltpetre became the backbone of fertiliser production. As the primary source of nitrogen, it dominated global trade on the fertiliser markets. This ‘white gold’ could be used as fertiliser, but also as explosive or rocket fuel. As Chile gained most of the territories with reserves of sodium nitrate, it achieved control over a scarce and precious resource. 

The demand, however, was outpacing the availability of Chilean saltpetre and things changed dramatically at the beginning of the 20th century. The scientist Fritz Haber synthesised ammonia – another nitrogen-based fertiliser – directly from hydrogen and nitrogen, and Carl Bosch transformed this into a large-scale industrial process, later known as the Haber-Bosch process. The nitrogen from air (which is abundant) is combined with hydrogen at high pressures and the result is ammonia. This revolutionised agriculture, as it secured the large-scale availability of economically feasible fertiliser, with major implications for food security. Crucially, it solved the scarcity issue of sodium nitrate through a chemical process, in a stark example of technological substitution.

Yet this drastic change came with its own dependency. While sodium nitrate was the precious resource for safeguarding crop yields, at the turn of the 20th century natural gas became the new resource upon which the production of fertilisers hinged, as the hydrogen from Haber-Bosch is typically obtained through steam-methane reforming (SMR). Interestingly, the military had a crucial role in the history of the Haber-Bosch process. Sodium nitrate was a key ingredient in explosives, one of the core ingredients in black powder, making it vital in military applications. During the First World War, the British naval blockade cut the supplies of Chilean saltpetre, endangering Germany’s supply of ammunition. The country tackled this dependency on sodium nitrate as representatives from the War Ministry tasked Bosch with scaling production to create an industrial-scale alternative to saltpetre. Ever since, whoever controlled natural gas resources has also controlled fertilisers and, to some extent, warfare. 

Conventional ammonia production is, to this day, based on the Haber-Bosch process. In a nutshell, natural gas contains methane, which reacts with steam to produce hydrogen. This reaction requires high-temperature steam (between 700°C and 1,000°C), making the process highly energy-intensive. The water-gas shift process produces more carbon dioxide and hydrogen, which is then purified. Nitrogen is added and synthesis gas is produced at a relatively low pressure (around 25-35 bar), which is converted into ammonia. The ammonia synthesis process, however, requires a pressure of 150-200 bar, significantly higher than in synthesis gas production. This necessitates compressors to close the pressure gap, equipment that is both energy- and capital-intensive. Together with the SMR step, this represents the largest energy draw in ammonia production.

These considerations underline the fragility of the supply chain, which can threaten the resilience of fertilisers given the need for natural gas and specialised equipment, as well as the significant energy consumption.

The ammonia supply chain is highly concentrated, with Chinese production accounting for 30 per cent worldwide, with the US, the EU, India, Russia and the Middle East each producing a further eight to 10 per cent. The availability of feedstock and process energy are the main deciding factors for the location of production. In August 2022, when gas prices spiked due to the war in Ukraine, the EU industry closed 70 per cent of its ammonia capacity as production was no longer profitable, while farmers also faced a 149 per cent year-on-year price increase for fertilisers. This resulted in fewer EU exports to other countries, significantly increasing the EU’s imports (by almost 20 per cent in the first eight months of 2022), and increasing dependence on Russia for imports. More recent reports show a European general import dependence of 45 per cent for fertilisers. The European sanctions on Russia did not include nitrogen-based fertilisers, given their importance for food and energy security. Russia was able to turn its natural gas surplus into nitrogen-based fertilisers that were then imported by the EU. 

The closure of the Strait of Hormuz caused the natural gas price to spike once again, threatening the economic viability of ammonia production by significantly increasing production costs. Some retailers reported surges in nitrogen fertiliser prices of US $100 per ton. 

At the same time, the closure of the Strait also blocks trade of ammonia itself, and Middle Eastern countries are major exporters. This has significant implications, as it is estimated that around half of the world’s population stays alive thanks to the fertiliser industry. 

An alternative to conventional ammonia is green ammonia. For that, green hydrogen is required, i.e. hydrogen produced through electrolysis powered by fossil-free energy such as solar, wind or hydro. The green hydrogen would be used similarly in the Haber-Bosch process, the difference being its origin. This could mark a new technological shift, lowering the dependence on natural gas. The developments around ammonia production have broader implications, beyond agriculture and warfare, and it is increasingly important for new purposes because it can act as an energy carrier. In this regard, green ammonia is deemed to play a significant role in the future of maritime transportation.

In the case of green ammonia, the availability of affordable renewable energy becomes the new decisive factor for the location and feasibility of production, together with the cost of the electrolysers that will be used to split the water molecule into hydrogen and oxygen using renewable electricity. At the moment, green ammonia production costs are estimated to be between 10 and 100 per cent more expensive than the conventional production based on fossil energy. 

There are lessons for statecraft that can be derived from the history of nitrogen fertilisers. These revolve around feedstock substitution, dual-use considerations, and the speed of transitions. First, an energy transition in fixed nitrogen production that initially looked like liberation, was in fact disguised under a new kind of dependency. Haber-Bosch replaced the over-reliance on guano from Peru and minerals from Chile with one on natural gas. Even though a new transition towards green ammonia could address that, it might also generate new dependencies on electrolysers (China leads on installed capacity) and on regions with abundant, low-cost renewable energy. 

Second, the dual-use issue is here to stay, with fixed nitrogen being the basis of food production as well as explosives. This makes it a commodity that cannot be purely civilian, not least because its future use-cases (such as maritime fuel) could also be used for warships. Mastering production of ammonia thus implies a strategic win for civilian and military contexts, and its trade will always be linked to both.

Third, the timing of transitions is crucial. While shocks in fossil-fuel energy supplies are visible within days or hours, shocks to fertiliser production and to crops materialise over seasons, making supply chains and risks associated with them less immediately obvious to policymakers. The situation could look suboptimal rather than critical and, by the time the scale of the challenge is revealed, it might be too late to undo all the structural damage that has been accumulating. 

Technological transitions might not move countries from vulnerability to security but rather create an interval where the old system is breaking down, before the new one is fully operational. Europe seems to find itself in that interval now, with support for gas-based ammonia production decreasing due to its prohibitive cost and its high carbon content, which makes it less politically acceptable. At the same time, green ammonia is not yet readily available and comes at a premium. 

Time and again, fixed nitrogen has been a matter of statecraft, as exemplified by the Guano War, the War in the Pacific, or the German breakthrough of industrial production of nitrogen fertilisers as a response to the British blockades of Chilean saltpetre. The uncertainty facing the conventional nitrogen-fertiliser industry is also an opportunity to innovate and transition to a new technology, safeguarding food supplies as well as military capabilities. Discussions of energy security mention natural gas, electricity and critical minerals. The transition to a more resilient, green ammonia deserves a seat at this table.