black sea grain deal

A vital agreement enabling the safe export of Ukrainian grain from the Black Sea region is set to expire on Monday as Russia announces its suspension of participation. The accord, mediated by the United Nations and Turkey last year, aimed to alleviate a global food crisis by facilitating the secure export of Ukrainian grain that had been blocked due to the Russia-Ukraine conflict.

Moscow has chosen not to extend the agreement, citing unfulfilled commitments to ease its own food and fertilizer shipments. However, Russia indicated that it may reconsider restoring the deal if further measures are taken to support its exports.

The expiration of the pact, according to Russia’s Foreign Ministry, will result in the withdrawal of safety guarantees and the reinstatement of the northwestern Black Sea as a temporary danger zone for shipping. Insurers are currently evaluating whether to suspend coverage for ships willing to sail to Ukraine.

Under the agreement, the last ship departed from Ukraine on Sunday. Russia’s invasion and blockade of Ukraine’s Black Sea ports in February 2022 led to a significant surge in global grain prices. Both Ukraine and Russia rank among the world’s top grain exporters.

Approximately 33 million metric tons of corn, wheat, and other grains have been exported by Ukraine under this arrangement.

Russia formally notified Ukraine, through its embassy in Minsk, about the suspension of its participation in the Black Sea grain deal.

As part of the efforts to persuade Russia to join the pact, a three-year memorandum of understanding was established with the United Nations, where U.N. officials agreed to assist Russia in its food and fertilizer exports.

However, Russia’s foreign ministry asserted that none of its demands, including the resumption of ammonia exports through a pipeline to the Ukrainian port of Odesa and the reconnection of its state agricultural bank, Rosselkhozbank, to the SWIFT international payments system, had been met.

The ministry emphasized that tangible results, rather than mere promises and assurances, are required before Russia considers reinstating the deal.

Ursula von der Leyen, the President of the European Union Commission, condemned Russia’s decision to suspend the Black Sea grain export deal as a “cynical move,” adding that the EU remains committed to ensuring food security for impoverished nations.

Turkish President Tayyip Erdogan expressed his belief that Russian President Vladimir Putin desires the continuation of the deal, stating that he will discuss it further during their upcoming meeting in August.

Denys Marchuk, deputy head of the Ukrainian Agrarian Council, the primary agribusiness organization in Ukraine, acknowledged that alternative routes such as river ports incur higher transportation costs. Nevertheless, he remained hopeful for a solution, suggesting the possibility of continuing the grain deal without Russia, as was done in November 2022.

The market response to the news was moderate, with U.S. wheat futures rising by approximately 3%, while U.S. corn futures saw an increase of nearly 1%.

“One German trader mentioned that there is a belief in the market that Russia and the EU possess substantial wheat supplies capable of meeting global demand in the coming months, thanks to incoming harvests.”

However, concerns have been raised regarding the expiration of the pact, as it may contribute to food inflation at a time when global hunger levels remain alarmingly high.

Jan Egeland, Secretary General of the Norwegian Refugee Council, expressed his worries, stating, “Global inflation, especially in food prices, has depleted a significant portion of our aid resources, more so than people realize. Rations for children are being reduced daily across the world, and this deal was one of the few sources of hope in this era of catastrophic hunger.”

A key demand from Russia has been the reconnection of the Russian Agricultural Bank (Rosselkhozbank) to the SWIFT international payments system. The bank was disconnected from SWIFT by the European Union in June 2022 following Russia’s invasion.

Sources reveal that U.N. Secretary-General Antonio Guterres made a final attempt on Tuesday to persuade Russian President Vladimir Putin to extend the grain deal for several months. In exchange, the EU would establish a connection between a subsidiary of Rosselkhozbank and SWIFT for grain and fertilizer transactions.


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