The future of the landmark agreement is facing growing uncertainty as only Ukrainian exports are being permitted
© Getty Images / Edwin Remsberg
The renewal of the UN-brokered Black Sea grain deal is facing uncertainty, with Russia seeking a shorter-term arrangement unless shipping and payment issues affecting its agricultural exports are resolved. RT looks into the issue to find out what could happen if Moscow does not re-sign the agreement.
- What is the Black Sea grain deal?
The Initiative on the Safe Transportation of Grain and Foodstuffs from Ukrainian ports allows for the safe passage of wheat, corn, sunflower products and other soft commodities shipped from the Black Sea to poorer countries in Africa and the Middle East. The deal with Russia was brokered in July 2022 by the UN and Türkiye to help resume agricultural shipments from Ukraine amid the ongoing conflict in the country, in order to avert a global food crisis. The agreement also required Western countries to unblock Russian grain and fertilizer exports – something that hasn’t happened due to sanctions on Russian shipping. - Under what conditions was the deal agreed?
A separate three-year pact was also struck in July, which stipulated that Moscow would receive sanctions reprieve for its own agricultural goods and fertilizer. While Russian agricultural exports have not been banned, sanctions on Russian shipping and banking are hindering exports and settlements. - How has the agreement actually been implemented?
The Russian part of the grain deal “is not being implemented at all,” while obstacles remain and are even getting tougher, according to Russian Foreign Minister Sergey Lavrov. The Kremlin has said not all parties have kept their side of the bargain. The West made a deal citing hunger in poor African countries, but in fact most of the exports go to the EU (about 50%), another 25% goes to upper-middle-income countries, and no more than 25% reaches its intended destination. Research by one Austrian outlet, published in February, has found that much of Ukraine’s corn ended up being fed to pigs in Spain, while wheat exports flooded markets in Eastern Europe. - How did this happen?
The EU allowed imports of Ukrainian agricultural goods to help Kiev financially amid the ongoing conflict in the country. All tariffs and quotas were lifted on Ukrainian grain exports to the bloc’s 27 member states in order to enable further transit of the grain to global markets. However, much of the supply has ended up getting stuck in Eastern European countries, where it triggered competition with local produce, sending prices plummeting and thus hurting local farmers. According to the UN Comtrade database, Ukrainian agricultural exports to Romania, Poland, Hungary and Slovakia skyrocketed from $24 million in 2021 to $2.4 billion in 2022. Attempts by local authorities to limit the importation of Ukrainian agricultural products have been faced with objections from the European Commission. Meanwhile, the UN admits that it can’t force the West to honor the Black Sea grain deal. - Why is Russia unsatisfied?
Russian negotiators have raised concerns and voiced discontent with UN efforts to lift Western restrictions affecting the country’s agricultural sector, as the latter has vowed to facilitate exports of Russian food, fertilizer and related raw materials. The Kremlin has demanded that Russian Agricultural Bank be allowed to return to the international SWIFT payment system, permitting Russia to import agricultural machinery, that insurance restrictions be removed and port access open for Russian ships and cargo, and that the financial activities of Russian fertilizer companies be unblocked. Moscow has been also complaining that the majority of goods were being shipped to well-fed countries, rather than to nations at serious risk of food shortages. Moreover, the West has been blocking Russian humanitarian supplies of free grain and fertilizers to Africa. - What’s the West’s position on the matter?
Western officials have accused Russia of obstructing the operation of the Black Sea Grain Initiative, claiming that Moscow was deliberately delaying inspections of grain-carrying ships in Turkish waters in order to inflate prices. The EU and US maintain that their sanctions on Russia do not hinder its food or fertilizer exports. Despite the uncertainty over the grain deal, the EU and G7 nations have continued working on additional economic sanctions against Russia, which could further exacerbate the situation and may ultimately push Moscow to abandon the initiative. The European Commission has reportedly suggested that Russian banks that have been disconnected from the SWIFT money-messaging system could use fax or e-mail to make transactions with European banks. - What’s the status of the deal right now?
In March, Moscow consented to extend the agreement for 60 days, stressing it would only consider a further extension if the demands in relation to its own exports were met. The arrangement is now set to expire on May 18. However, this week the Kremlin warned that the grain deal will be scrapped unless the West fulfils its end of the bargain. On Monday, UN Secretary General Antonio Guterres reportedly handed Russian Foreign Minister Sergey Lavrov a letter concerning the grain deal, offering a “detailed account of the progress already made” and affirming the world body’s “commitment to continue working on the remaining issues.” Lavrov confirmed the existence of the letter to reporters after meeting with Guterres for more than an hour in New York, but noted that “so far, the progress, frankly, is not very noticeable.” According to Lavrov, Moscow does not see “the desire of Western countries to really do what is necessary” for the success of the grain deal. - Why is the grain deal important?
Ukraine is a major supplier of grain to the World Food Program and the Black Sea deal could have provided much-needed relief to poorer countries. The country used to export around three-quarters of the grain it produced, with around 90% of those exports having previously been shipped by sea from Ukraine’s Black Sea ports, according to data from the European Commission. The UN-brokered deal has guaranteed the safety of ships carrying Ukrainian grain, fertilizer and other foodstuffs through a humanitarian corridor in the Black Sea. Data from the UN shows that, under the pact, Kiev has been able to export more than 27 million tons of agricultural products. - What could happen if the agreement is not extended?
It is unclear if Ukraine would be able to continue exports if the deal is scrapped. Meanwhile, the uncertainty over the future of the agreement has been raising concerns about growing food crises, especially in East Africa, where over 20 million people are reported to be experiencing hunger. A collapse of the deal would “hit those on the brink of starvation the most,” the East Africa Emergency Director at the International Rescue Committee, Shashwat Saraf, warned. The UN estimates that the reduction of prices for staple foods as a result of the Black Sea grain deal has indirectly prevented some 100 million people from falling into extreme poverty.
For more stories on economy & finance visit RT’s business section
