The russian federation has announced that it will stop participating in the grain initiative, which allowed the export of Ukrainian grain from Black Sea ports. It is predicted that Ukraine, like the West, condemned such actions of the kremlin. The Minister of Foreign Affairs, D. Kuleba, said that russia is “using hunger for blackmail.” The President of Ukraine V. Zelenskyy emphasized that russia has violated its agreements with the UN and Turkey. And the head of the European Commission, Ursula von der Leyen, called such a move by the russian federation “cynical.” The White House warned putin’s team that failure to extend the grain deal would cost the kremlin huge diplomatic losses, as well as a loss of confidence in the Global South, Africa, Latin America and Asia. “I condemn russia’s decision to withdraw from the Black Sea Grain Initiative, as a result of which hundreds of thousands of people around the world will be deprived of basic nutrition,” wrote NATO Secretary General J. Stoltenberg. British Foreign Minister J. Cleverley noted that the russian dictator uses food as a weapon.
As you know, the grain initiative, concluded on July 22, 2022, was mediated by R. Erdoğan and the UN and provided for the export of grain from three Ukrainian ports (“Odesa”, “Chornomorsk” and “Pivdennyy”). The initiative was extended several times – in November for 120 days and then twice more for 60 days. For the past several months, russia has refused to fully comply with the initiative, blocked inspections of the ships and prohibited the export of grain from the Pivdennyy port. The grain initiative gave Ukraine the opportunity to export 32.9 million tons of agricultural products, including more than 250,000 tons of grain to Ethiopia and Yemen, 130,000 tons to Afghanistan, and more than 50,000 tons to Somalia. As a result, world grain prices fell by 23% in a year, which also benefited poor African countries.
What are the consequences of the termination of the grain agreement for russia, Ukraine and the world?
According to Western intelligence, moscow decided to terminate the initiative as a response to Erdoğa for the uncoordinated transfer of captive Azovs to Ukraine. And to make the rejection look more convincing, on the last day of the previous grain initiative, an “unexpected” undermining of the support of the Crimean bridge was carried out. The attacks on Crimea were made by surface drones which were repeatedly presented by russia as a reason for the termination or non-renewal of the grain initiative. In fact, the president of the russian federation has found himself in an extremely unpleasant situation and currently has several options for action. Order the army to ignore grain cargo ships, or order them to destroy the ships, provoking a new round of conflict. If Turkey provides military support to Ukrainian ships, it will mean war with Turkey. The probability that russia will attack ships under the auspices of the United Nations is assessed by experts as negligible.
The position of the russian federation will deal a significant blow to the economy of Ukraine and may lead to a global increase in food prices, especially in the poorest countries. After moscow’s withdrawal from the Black Sea Initiative, wheat futures for September delivery rose to $6.89. per bushel (by 4.24%).
❗️What are the next steps?
Firstly, it is too early to talk about russia’s final withdrawal from the Black Sea Grain Initiative, because after the August meeting between putin and Erdogan, everything may change. The UN is ready for some compromises in order to continue the grain initiative with putin. In particular, moscow is offered as an alternative to SWIFT an individual payment mechanism for the russian agricultural bank through JP Morgan. The kremlin authorities avoid clarity, since in one comment they speak about the termination, and in another – about stopping. It shows that the kremlin is ready to return to the grain initiative in exchange for certain concessions.
Secondly, V. Zelenskyy suggested that Turkey and the UN continue to use the Black Sea corridor for the export of Ukrainian agricultural products in a tripartite format without the consent of russia. An alternative way involves the export of grain through the river ports of the Danube. Now it’s up to Turkey, which has to give the go-ahead for launching ships into its waters. Experts emphasize that in this case there may be problems with the insurance of ships bound for the ports of Ukraine. Insurance companies may start denying insurance because of the threat of shipwrecks. It is also worth recognizing that river transportation is less efficient: the amount of grain exported will decrease, and the cost of its transportation will increase.
Thirdly, the United States and partners will consider other options for exporting Ukrainian grain to the world market, taking into account export by rail and road transport. However, alternative routes are not able to fully compensate for Black Sea transportation. After all, this year’s export potential of Ukraine is estimated at almost 50 million tons, and the annual carrying capacity of the European Union is only 12 million tons per year.
