Russia used Grain deal to get sanction exemptions for its bank

The grain agreement has been used by Russia as a tool to ease Western sanctions pressure. Namely, Moscow has brokered sanctions exemptions for its state bank in the Ukraine grain deal.

The US has reactivated JSC Rosselkhozbank’s correspondent accounts in exchange for Russia’s acceptance of the grain agreement. Russia is now able to export agricultural goods and mineral fertilizers via these accounts.

The grain deal was extended by four months 

The extension of the grain agreement to 17 March 2023 was announced by Istanbul’s coordination center. 

Rosselkhozbank is now exempted from Western sanctions 

Russia demanded the West lessen restrictions on the state agriculture bank Rosselkhozbank to facilitate Russian grain exports during the talks on grain shipments from Ukraine. Ukraine grain export is vital to avoid famine in many countries in Africa and Middle East regions dependent on Ukrainian grain.

Moscow suspended its participation in the grain deal in October

Moscow suspended its participation in the secure Black Sea grain corridor in late October but rejoined after four days, easing fears of further disruptions to grain exports from key supplier Ukraine at a time of rampant global food inflation.

Russian President Vladimir Putin decided to halt the UN-brokered agreement, while U.N. chief Antonio Guterres was pushing Moscow to agree to extend it beyond its scheduled expiry on November 19.

Russia demanded the West exempt Rosselkhozbank from sanctions

Before the talks, Reuters sources, who declined to be identified due to the sensitivity of the topic, said that the Kremlin was demanding Western countries to exempt the state bank Rosselkhozbank from economic sanctions and to restore its correspondent accounts in the US.

Before the latest Western sanctions against Moscow for its war in Ukraine, payments for Russian agricultural products were handled by subsidiaries of other Russian banks in Switzerland. The facilitation of payments for Russian food and fertilizer through Rosselkhozbank was discussed with the EU representatives.

‘Russia is using food as a weapon of war’ – EU spokesperson told Reuters

Asked by Reuters to comment, a spokesperson for the EU’s executive Commission said the EU sanctions against Russia did not aim to target the trade in Russian agricultural products.

“Russia is using food as a weapon of war and this is yet another manipulation of the facts and spreading disinformation,” the spokesperson said but refused to disclose the name.

Russia said its consent to extend the deal on grain export through the Black Sea depends on support for its grain and fertilizer exports. 

Ukraine is one of the biggest grain suppliers in the world

Ukraine is one of the biggest suppliers of grains, oilseeds, and vegetable oils. But Ukrainian exports to global markets were blocked by the war and Russia’s control of Black Sea waters until July.

Patrushev used to be the management board chairman of Rosselkhozbank

Rosselkhozbank is closely linked to the Kremlin leadership. Dmitry Patrushev, son of Security Council Secretary Nikolai Patrushev, was the bank’s management board chairman from 2010-2018 and is now Russia’s agriculture minister. The bank and Patrushev became subject to Western sanctions.

“Rosselkhozbank, Russia’s sixth-largest bank by assets, must be reconnected to the SWIFT international payment system, otherwise it will be impossible to move forward in discussions on a grain deal,” Russian deputy foreign minister Sergei Vershinin said. “This point is extremely important,” he stressed.

Ukrainian grain exports are essential to prevent food crisis and famine

A United Nations-brokered grain deal between Russia and Ukraine was renewed on November 17 as a result of talks in Istanbul mediated by the UN. The agreement was extended by four months. The grain deal allows Ukrainian grain exports to world markets and it is essential to prevent a further surge in world food prices.

Grain deal removes a Russian blockade on Ukrainian ports

The grain deal among the U.N., Russia, Ukraine, and Turkey was extended for a further 120 days. The agreement removes a Russian blockade on Ukrainian ports, allowing safe passage of grain ships.

The Black Sea Grain Initiative, negotiated with the mediation of the UN and Turkey, was signed in July and it created a corridor for food and fertilizer shipments. However, in October Russia refused to renew it.

The grain deal allowed Ukraine to ship 11.2Mt agricultural products in July – October

Since the corridor opened in July, more than 450 vessels have shipped almost 11.2Mt Ukrainian agricultural products to global markets. This included 4.54Mt of corn and 3.24Mt of wheat, all combined more than 70pc of total exports. Other commodities shipped include 830,000t rapeseed, 756,000t sunflower oil, 655,000t sunflower meal, 516,000t barley, and 218,000t soybeans, Grain Central reported.

The Black Sea Grain Initiative allows for the export of grain and other agricultural products from three Ukrainian ports on the Black Sea – Odesa, Chornomorsk, and Yuzhny. These ports have a combined export capacity of around 3 million tonnes per month. For example, Mykolaiv shipped 35 percent of Ukraine’s food exports before the Russian invasion and war. 

Ukraine asked for these three ports to be included in the deal. Ukraine had also pushed for a one-year extension to the deal instead of four months.

A decline in grain and agricultural product shipments from Ukraine has caused the food-price crisis in the world this year.

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