Russia says it will not renew export pact until hurdles lifted on its own agricultural shipments
Bulk carrier ARGO I is docked at the grain terminal of the port of Odessa, Ukraine, on April 10, 2023, from where Ukraine ships wheat according to the grain agreement the country currently has with Russia. (PHOTO / REUTERS)
Wheat and corn prices on global commodities markets have jumped after Russia announced on July 17 its pullout of a crucial deal allowing the export of grain from Ukraine.
Ukraine and Russia are both major global suppliers of wheat, barley, sunflower oil and other affordable food products that developing nations rely on.
The Kremlin on July 18 issued a veiled warning over the future of grain exports via the Black Sea, claiming Kyiv was using the export corridor “for combat purposes”.
The Black Sea Grain Initiative — originally brokered by Turkiye and the United Nations a year ago — has ensured the safe passage of ships carrying grain from Ukrainian ports.
The international community sees the deal as “critical” to reducing food prices around the globe, which spiked after Russia launched its special military operation in Ukraine in February 2022.
Kremlin spokesman Dmitry Peskov told reporters on July 17 that Russia would not renew the pact right now, saying it “has been terminated”.
Moscow has complained it is being prevented from adequately exporting its own food and fertilizer, which Peskov cited for pulling out of the deal.
“As soon as the Russian part is completed, the Russian side will return to the implementation of this deal immediately,” he said.
On July 15, Russian President Vladimir Putin said the main objective of the deal — supplying grain to countries in need — “has not been realized”, again complaining that Russia faced obstacles exporting its own food.
Peskov left the door open to reviving the deal in the future, saying that Russia will comply “as soon as the Russian part (of the deal) is completed”.
Adam Hodge, a spokesman for the United States National Security Council, said in a statement that Russia’s decision will worsen food insecurity and harm millions of vulnerable people around the world.
Wheat futures on the Chicago Board of Trade jumped 2.7 percent to $6.80 a bushel and corn futures rose 0.94 percent to $5.11 a bushel as traders feared an impending supply crunch of the staple foods.
So far, the Black Sea deal has allowed for the export of almost 33 million metric tons of food through Ukrainian ports, according to UN data. The deal had been renewed three times, but Russia has been complaining it has been hampered in exporting its own products.
The Kenyan Ministry of Foreign Affairs warned that Russia’s decision to terminate the Black Sea deal is a “stab on the back at global food security prices”.
Korir SingOei, Kenya’s principal secretary of foreign affairs, said in a tweet on July 18 that the decision “disproportionately impacts” countries in the Horn of Africa that have already been impacted by drought.
In response, Moscow said it was letting the deal struck to allow the export of Ukrainian grain to expire. The deal allowed Ukraine to export grain from its ports and navigate a safe passage through the Black Sea to the Bosporus Strait in Turkiye.
Turkish President Recep Tayyip Erdogan said officials were talking with Russia and that he hoped the deal would be extended.
However, the Russian Foreign Ministry again declared the northwestern Black Sea area “temporarily dangerous”.
Sergei Markov, a Moscow-based political analyst, speculated that if Ukraine does not heed the warnings, Russia could strike Ukrainian ports or place mines on shipping routes.
Andrey Sizov, director of SovEcon, a firm focused on Black Sea agricultural market research, said in an interview with the Russian newspaper Kommersant that the market is likely questioning the seriousness of Russia’s rhetoric as it expects Ukrainian food exports to continue.
According to Sizov, in general, Ukraine will be able to fulfill its grain export plan for this season even without using deep-water terminals on the Black Sea.
“Ukraine is already making active use of the Danube as a route for grain exports and recently sent the first Handymax class vessel via this channel, carrying around 20,000 metric tons of corn,” the Russian expert said.
The prospects for further implementation of the grain deal remain foggy, as Andrey Koshkin, head of the political science department at the Plekhanov Russian University of Economics, thinks that, most likely, Russia will reject another extension of the deal.
“Naturally, if the situation does not change, all things considered, we can suspend our participation in this four-party agreement,” the expert said.
Russian Grain Union President Arkady Zlochevsky hailed the decision, terming it the right move and saying it would prop up Russian wheat prices.
