What does the end of the Ukrainian grain export deal mean for the world?

Russia’s withdrawal from the grain deal means that Russia will no longer guarantee safe passage through the waterway. Ukraine is calling on other countries to help with the transfer from its three ports covered by the agreement.

Bloomberg reported that Ukrainian grain will still reach the market via other routes, but higher transportation costs could negatively affect the sowing season, which starts in a few months and could lead to a reduction in global supplies in the long run.

Why has Ukraine had such an impact on global food markets?

Ukraine is the second largest country in Europe by area, and its vast plains with dark, fertile soil are ideal for farming. Agricultural products from Ukraine helped shape the course of European history, feeding the populations of rapidly growing industrial cities in the 19th century and sustaining the Soviet Union during decades of isolation.

Before Russia’s all-out war, Ukraine exported more grain than the entire European Union and supplied about half of the sunflower seeds and oil sold worldwide. Even during Russia’s full-scale invasion, Ukraine was the sixth-largest exporter of wheat and the third-largest exporter of corn. In 2022, Ukraine’s grain exports exceeded 48 million tons.

In 2022-2023, Ukraine will account for about a sixth of global trade, despite Russia’s ongoing war.

The grain deal allowed Ukraine’s three Black Sea ports to open for harvest transportation. All ships had to be inspected at entry and exit at a centre set up in Istanbul, jointly staffed by Russia and Ukraine, as well as Turkey and the UN. During the year of the agreement, almost 33 million tons of agricultural products were shipped.

Why did Russia withdraw from the grain deal?

Russia stated that the reason was that obstacles to exporting Russian fertilisers and food had not been lifted and that it saw no progress in resolving other issues with transportation, logistics and insurance, and asset unfreezing.

Russia claims it might rejoin the grain agreement, but only if limits governing its exports of food and fertiliser are relaxed. In the West, that is regarded as an effort to use food supply as leverage to lessen financial restrictions, which already allow for exceptions to allow Russia to sell food.

Grain deal becomes a weapon against sanctions

In Europe and Ukraine, observers and governments see this as an attempt to use food supplies as leverage to ease financial restrictions, which already provide exceptions to allow Russia to sell food.

Several observers have noted that Putin is using the food weapon against the sanctions introduced for his war against Ukraine. This would appear to be blackmail to escape punishment for the crime of violating the territorial integrity of a neighbouring country.

The head of EU diplomacy, Josep Borrell, said that Russia, by terminating the grain deal, further exacerbates the global food security crisis.

Which countries will be most impacted by the grain deal termination?

The biggest buyers of Ukrainian food shipped through the safe corridor are China, Spain and Turkey. Several African and Asian countries, such as Egypt and Bangladesh, have imported more than a million tons each under the program. 

The UN emphasised that shipments under the agreement help to increase global supplies and reduce prices, regardless of where the grain is shipped. World grain prices have already jumped after Russia withdrew from the deal.

What does this mean for Ukrainian farmers?

Ukraine insists on continuing grain exports from Black Sea ports despite Russia’s threats. The US has said that cargo escorting is impossible, and insurance broker Marsh has suspended its grain export program from Ukraine.

In the future, if Ukraine can export only via alternative routes, it will increase costs for farmers, which may prompt them to reduce crops further, and this will lead to a decrease in supplies from Ukraine.

Russian missile attack on Ukrainian port destroyed 60 tonnes of grain

After Russia abandoned the grain deal, it poured Ukraine with massive new missile attacks. Russians targeted port infrastructure in Odessa and Mykolaiv. In a port attack, a Russian missile destroyed 60 tonnes of Ukrainian grain.

Ukraine accused Russia of damaging grain export infrastructure in “hellish” overnight strikes focused on two of its Black Sea ports, vowing not to be intimidated from working to keep grain exports moving out of them.

How Zelensky reacted to the port attack?

In his evening address, the President of Ukraine summarised the events of July 19. He also devoted part of his speech to missile attacks on grain infrastructure.

Volodymyr Zelensky emphasised that this attack proves that Russia targets not only Ukraine and Ukrainians. A strike on the port infrastructure could have caused mass starvation because there were about a million tons of food there at the time of the shelling.

“The port terminal that suffered the most from Russian terror that night stored 60,000 tons of agricultural products intended for shipment to China. That is, everyone is affected by this Russian terror. Everyone in the world should be interested in bringing Russia to justice for terror”.

Volodymyr Zelenskyy, President of Ukraine

Russia can attack civilian vessels in the Black Sea – US

Russians can also attack civilian vessels in the Black Sea. This assumption was voiced by the spokesman for the White House National Security Council, Adam Hodge. He said that American officials have information that Russia has installed additional sea mines on the approaches to Ukrainian ports.

“We believe that this is a coordinated effort to justify any attacks against civilian ships in the Black Sea and lay blame on Ukraine for these attacks“.

Adam Hodge, Spokesman for the White House National Security Council

According to Hodge, Russia has decided on the classification of ships that will be travelling to Ukrainian ports in the Black Sea. The Kremlin will consider them “potential carriers of military cargo.” This means that the enemy can attack them as well.

What did Putin say on the grain deal?

After his spokesman announced the termination of the grain deal, Russian dictator Putin said that the parties to the deal allegedly did not fulfil the agreements.

“This includes their immediate connection to the SWIFT international banking settlement system. We don’t need any promises or ideas in this regard. We need these conditions to be fulfilled“.

Vladimir Putin, Russian president

At the same time, Moscow, according to Putin, is ready to return to the grain deal if all its needs are considered. In particular, Moscow demands its banks to be reconnected to SWIFT, and other restrictions to be lifted.

Moscow’s blackmail means that the sanctions work, and the Russian economy is now in a bad shape.

Croatia and Lithuania offered their ports after Russia stopped grain deal

The EU is seeking to transport more Ukrainian grain by road and rail to compensate for Russia’s withdrawal from the grain deal.

After Russia suspended the international agreement, European partner states are ready to help find new routes for Ukrainian grain exports. Thus, Croatia and Lithuania are offering their ports.

Croatian Foreign Minister Frano Matusic made this proposal at a meeting of the UN General Assembly. 

“Croatia is ready to help find new export routes for Ukrainian grain. Croatian railways and ports in the Adriatic Sea are one of the possible alternative routes”.

Frano Matusic, Croatian Foreign Minister

The minister added that Russia’s decision to terminate the agreement could provoke famine in many parts of the world. He emphasised that Croatia will support Ukraine as long as it is needed.

Lithuania has also announced that it is ready to ship Ukrainian grain from its main port. Algis Latakas, CEO of the Port of Klaipeda, stated this. The port could ship 10 million tons of grain from Ukraine. However, the logistics of food delivery to the Baltic Sea are complicated.

Food crisis expected

Ukraine exported less than 1.4 million tonnes of grain in June 2023. It had shipped nearly four million tonnes per month during the previous nine months.

The U.N. warned that “emergency levels of hunger” were threatening 44 million people in 38 nations.

According to the U.N. Food and Agriculture Organisation, global food prices have dropped by 20% since the grain agreement was reached in July 2022.

In the middle-term and long-term Ukraine and its partners can find solutions for the Ukrainian grain supply. But it will impact the shipment costs. Even if a famine is avoided, grain prices will jump, and it can generate a food crisis in many countries.

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