Recently, Moscow decided to put an end to the signed pact known as the Black Sea Grain initiative. This agreement signed in 2022, has allowed 32 million tons of food goods. These grain exports are key to countries in Africa and Southeast Asia.
The Black Sea Grain initiative, an agreement between Russia, Ukraine and Turkey, and promoted by the UN and Turkey, allowed and ensured the traffic of grain from Ukrainian ports to 45 countries. This agreement allowed Ukraine, one of the world's leading grain producers and exporters, to export its grain. This initiative also made it possible to reduce grain prices and avoid a food crisis in some states.
Following Moscow's decision to terminate this agreement, citing Ukraine's non-compliance. In turn, Russia demanded the fulfillment of several conditions, one of which is the commissioning of the Togliatti-Odessa ammonia export pipeline. The other Russian claims are focused on U.S. and EU sanctions. Moscow requested that its state-owned agricultural bank, Rosselkhozbank, be reinstated within the SWIFT payment system (Russian banks were excluded from this system as part of the sanctions in 2022).
This decision, if sustained over time, could reduce Ukrainian grain exports and put food security at risk for several states on several continents. In this article, some light will be shed on what this initiative is, what implications it has and its impact.
It is important to clarify several key aspects. Russia and Ukraine play a key role in global commodity markets. Both states, known as the "breadbasket of Europe," account for 29% of global wheat exports and 19% of corn exports.
Ukraine is one of the world's largest grain exporters, typically supplying some 45 million tons of grain to the world market each year. Most of the crops in this state are located in the east of the country. In turn, Ukraine is the world's largest producer of sunflower oil, with Russia in second place. Wheat and sunflower oil are key to many food products. It is worth mentioning that Turkey and Egypt receive almost 70% of their wheat imports from Kiev and Moscow.
When Russia invaded Ukraine in February 2022, Moscow blockaded Ukrainian ports on the Black Sea. Along with this, most of the crops are located in the east of the country, the focus of the clashes with Russia. The war reduced Ukrainian grain production and supply.
The Russian blockade of Ukrainian ports early in the war last year resulted in about 20 million tons of grain being trapped in the Black Sea. Consequently, this sent prices soaring in the first months of 2022.
Thanks to the mediation of Turkey and the UN, in July 2022, the Black Sea Grain initiative was signed between Ukraine and Russia. Under this agreement, 3 key issues were agreed upon:
Cargo ships were guaranteed safe and secure passage along a Black Sea corridor 310 nautical miles long and three nautical miles wide, to and from three Ukrainian ports.
The Russian navy was allowed to inspect ships entering the Black Sea via the Bosporus or Strait of Istanbul, to ensure that they were not carrying weapons.
The UN promised Russia that it would help the Eurasian country increase its own grain and fertilizer exports. These agricultural products have not been under U.S. and EU sanctions.
To oversee the agreement, the UN-sponsored Joint Coordination Center was created to monitor the flow of these goods. This initiative was renewed three times. During this period, world food prices fell by approximately 20%.
According to the UN, of all the food products that Ukraine exported last year under the agreement to export grains:
47% went to "high-income countries," including Spain, Italy, and the Netherlands.
26% went to "upper middle-income countries" such as Turkey and China.
27% ended up in "low and lower middle income countries" such as Egypt, Kenya and Sudan.Ukraine has also sent 625,000 tons of food as humanitarian aid to Afghanistan, Ethiopia, Kenya, Somalia, Sudan and Yemen.
From June 8, 2023, according to the Institute for the Study of War, the Ukrainian counteroffensive began. These attacks are localized mainly in the Donbas and the east of the Zaporiyia region. In addition, on July 17, 2023, the Kerch bridge was attacked again, and both Russia and Ukraine are accusing each other. The reprisals make it difficult for the two parties to come closer together.
Russia had already renewed the grain agreement three times, but this time made good on its threat not to renew it. According to Moscow, sanctions on Russian state agencies exporting food and fertilizers, exempted from the sanctions, were in breach of the agreement.
In the short term, Ukraine is the most affected by this decision. This blockade on its grain exports is hitting an economy hardest hit by the war. The state is facing the economic impact and increased costs of redirecting grain exports to other routes.
If the blockade is limited in the short term, prices could remain stable. There is a greater amount of wheat from Australia, Argentina or Russia that has been exported. However, if the blockade is prolonged, the shadow of a potential food crisis could be rekindled in several states. It is worth mentioning that Somalia and South Sudan could suffer an imminent famine.
Another important aspect is the alternative routes. One potential alternative would be to transport Ukrainian grain by land to Poland and transport it to the Romanian port of Constanta. However, Poland, Hungary, Slovakia, Bulgaria and Romania have asked the EU to extend the ban on Ukrainian grain until the end of the year, fearing that Ukrainian grain will impact their domestic production.
Another route would be to transport grain to the Baltic Sea. However, Ukrainian railroads have a different gauge than in the rest of Europe. Each train loaded with grain has to be transferred from one wagon to another at the border. In addition, the rail network of several states does not have the capacity to transport even relatively low volumes of grain, which Ukraine exported overland.
On July 21, 21, Russia struck for the fourth consecutive day Ukrainian food export facilities and seized ships in the Black Sea. The direct attacks on Ukrainian grain, a key part of the global food chain, came after Kiev vowed to challenge Russia's naval blockade of its grain export ports following Moscow's withdrawal this week from a UN-brokered safe sea corridor agreement.
The end of the agreement could lead to higher world food prices, shortages in some regions and, potentially, new waves of immigration. If the blockade is maintained and an alternative route is not found, the food situation could worsen further, with consequences in the short and medium term.
Suggested readings:
1. Dlugy, Y. (2022) The grain deal, The New York Times. Available at: https://www.nytimes.com/2022/07/22/briefing/russia-ukraine-war-grain.html
2. Leiva, A. (2023) ¿Qué consecuencias tiene el fin del acuerdo del grano entre rusia y ucrania?, El Orden Mundial - EOM. Available at: https://elordenmundial.com/consecuencias-fin-acuerdo-grano-rusia-ucrania/
3. Rusia Aborda con Turquía Alternativas Al Acuerdo del Mar Negro para exportar Su Grano (2023) Infobae. Available at: https://www.infobae.com/espana/agencias/2023/07/18/rusia-aborda-con-turquia-alternativas-al-acuerdo-del-mar-negro-para-exportar-su-grano/
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