EXPLAINER: What Russia’s suspension of grain deal could mean

Team Udayavani, Nov 1, 2022, 8:28 AM IST

FILE - The ship Navi-Star sits full of grain since Russia's invasion of Ukraine began five months ago as it waits to sail from the Odesa Sea Port, in Odesa, Ukraine, July 29, 2022. (Credit: AP Photo/David Goldman, File)

Russia has suspended its part of the deal allowing Ukraine to ship grain from its Black Sea ports safely amid a monthslong war, and it appears that the remaining partners are now left to take their chances.

On Monday, Ukraine said a dozen ships had sailed despite initially reporting that more than 200 vessels, many loaded and ready to travel, were stuck after Russia’s weekend announcement. Such exports are crucial: Ukraine and Russia are key global suppliers of wheat, barley, sunflower oil and other food to countries in Africa, the Middle East and parts of Asia where many are already struggling with hunger.

But it’s not immediately clear who would choose to take the risk of sailing from Ukraine without Russia’s protection after Moscow alleged a Ukrainian drone attack against its Black Sea fleet. Kremlin spokesman Dmitry Peskov said implementing the grain deal is “hardly feasible” in a situation when “Russia talks about the impossibility of guaranteeing the safety of navigation in the mentioned areas.” Here is what Russia’s decision could mean for a world increasingly worried about food security and high food prices:

WHAT HAS THE DEAL ACHIEVED?

The grain initiative has been a rare example of cooperation between Ukraine and Russia since Russia’s invasion in February. Brokered by the United Nations and Turkey, it has allowed more than 9 million tons of grain in 397 ships to safely leave Ukrainian ports.

The grain agreement has brought down global food prices about 15% from their peak in March, according to the U.N., and the U.N. secretary-general had urged Russia and Ukraine to renew the deal when it expires Nov. 19.

Wheat futures prices jumped more than 5% on Monday in Chicago following Russia’s move, while key oil futures prices rose in Asian markets.

A spokeswoman for the Joint Coordination Center overseeing the logistics and inspection of ships didn’t immediately respond to questions Monday about which vessels might sail after Russia suspended its role.

Before the grain deal was brokered, the United States and European partners accused Russia of starving vulnerable parts of the world by denying exports from one of the world’s major grain producers. Since the deal, Russian President Vladimir Putin has alleged that most of the exported grain was going to Europe instead of the world’s hungriest nations.

Experts have said many shipments are fulfilling business deals but have played an important role in stabilizing grain markets, even if data by the deal’s monitor has shown that relatively few ships have had African nations as their destination.

The U.N. Conference on Trade and Development said in a report published last week that wheat is mostly going to developing countries, saying nearly 20% of exported wheat has gone to the least developed countries.

Ukraine has said more than 5 million tons have been exported to African and Asian nations, with 190,000 tons of wheat sent to countries struggling with hunger that are getting relief from the U.N. World Food Program.

A ship carrying 30,000 tons of wheat for Ethiopia under that program sailed Monday, Ukraine said, one of a dozen ships with more than 354,000 tons of agricultural products that sailed after the U.N. and Turkey agreed on the traffic of ships through the humanitarian corridor. They continue pursuing full implementation of the Black Sea Grain Initiative.

Asked about Turkey’s intention to continue implementing the deal without Russia’s participation, the Kremlin spokesman said only that “contacts continue with the Turkish side, as well as the U.N.,” via various channels.

Ethiopia, along with neighboring Somalia and Kenya, is badly affected by the region’s worst drought in decades, and the U.N. has warned that parts of Somalia are facing famine. Thousands of people have died there.

WHAT HAPPENS NOW?

Russia has requested a meeting Monday of the U.N. Security Council to discuss the issue, while offering to supply up to 500,000 tons of grain “to the poorest countries free of charge in the next four months.” While sanctions on Russia don’t affect its grain exports and a parallel wartime deal was meant to clear the way for Moscow’s food and fertilizer shipments, some businesses have been wary, and some African leaders have repeated Moscow’s allegation that Russian exports are hampered.

Meanwhile, Ukraine, the U.S. and allies have again begun to accuse Russia of playing “hunger games” with the world. France said it is working toward allowing Ukraine to export food supplies via land routes through Poland or Romania, but the country is able to ship far more by sea.

WHAT ELSE AFFECTS FOOD SUPPLY?

Peter Meyer, head of grain and oilseed analytics at S&P Global Platts, said he doubts that Russia suspending its part of the agreement will have a lasting impact on the price and supply of corn and grain. Commodity traders were skeptical all along that the deal would last, he said, one reason that corn prices have gone up, not down, since the arrangement was reached in July.

Grain markets are more focused on other issues, Meyer said, including low water levels in the Mississippi River that slows the export of U.S. farm products, a disappointing corn crop in the American West, and the threat of a U.S. rail strike. “There’s a lot of other stuff going,” he said.

But in parts of the African continent, where prices have remained high, concerns are rising again. “This will send another mini shockwave through the markets, and I think it will lift prices for a while,” said Shaun Ferris, a Kenya-based adviser on agriculture and markets for Catholic Relief Services, a partner in World Food Program distributions. “This will mean that prices in East Africa, at record highs, are not going to come down anytime soon.”

After four failed rainy seasons in the Horn of Africa, millions of people are hungry, and millions of livestock that are a critical source of food and wealth are dying. Even pastureland has disappeared. Harris said he’s been speaking with companies that are sending hundreds of tons of processed feeds to northern Kenya just to keep weakened animals alive.

The latest setback in Ukrainian exports is another layer of stress on food security systems, he said, “certainly making lives of millions here a touch more miserable than it is currently.”