Russia’s withdrawal from a UN-and Turkish-brokered deal to allow the export of grain from Ukrainian ports again threatens the food security of millions living in drought- and famine-affected regions around the world. “Russia has been slowly killing the grain initiative, from one extension to another,” explained Ukrainian foreign minister Dmytro Kuleba. “Prices for grain all across the world will go up, and people in the most vulnerable regions of Asia, Africa, will feel it.”
Following its withdrawal, Russia will deem all maritime traffic approaching Ukrainian ports as “potential carriers of military cargo.” Additionally, Russia immediately stepped-up attacks on Ukraine’s grain-exporting Odesa region with cruise missile and drone attacks on critical infrastructure, which destroyed approximately 60,000 tons of grain.
CEPA asked its experts to evaluate the prospects for a renewed deal, the impact on global markets and supplies, and the potential consequences for Ukraine.
The important aspect of the grain deal suspension is the propaganda and false narratives promoted by Russia that we should consider. Two main narratives currently promoted are: Russia did not get anything from this Deal due to the sanctions, and Grain Deal was postponed due to the Crimea bridge attack. However, we need to explain more that none of Russian grain or ammonia exports have been under sanctions, they successfully traded their own and stolen from Ukraine grain with Asia and the Middle East. The attack on the Kerch Strait Bridge to Crimea cannot be the reason, as de facto Russia stopped inspecting ships since the end of June (a few weeks before the deadline), and the last ship left Odesa port three days before the attack. In the last months, Russia prolonged the agreement for just two months, instead of the four previously agreed, and sabotaged all inspections, with weeks without letting ships pass.
The Russia-Africa summit is expected next week in Saint Petersburg, and it will be a good reason for African leaders to raise the issue. How far the Kremlin is ready to go to manipulate food security and their partners’ wellbeing. The night attack against Odesa port and last week’s attack against Chornomorsk port – both involved in the Black Sea initiative – are messages to shipowners, insurance agencies, and businesses, “don’t be involved in any alternative shipments without Russian approval.” Being in the mid of the harvest season, Ukraine and its European partners should be ready for the weeks without sea routes and the high intensity of the land shipments.
Olya Korbut, Democracy Fellow, Center for European Policy Analysis
There are various scenarios for the future of the “grain corridor.” But it should be clear that Russia is using all tools to completely destroy the Ukrainian economy, as sea routes are the main routes for Ukrainian grain export. Damaging the infrastructure of the ports of Odesa and Chornomorsk, that are participating in the grain initiative and the destruction of 60,000 tons of grain as a result of Russian shelling on July 19 proves this. Ukraine is among the top-five world grain exporters, and Russia seeks to replace it.
The “grain corridor” has been, and remains, a tool of blackmail by Russia. This once again confirms that it is necessary to establish full NATO dominance in the Black Sea to ensure freedom of maritime navigation and force Russia to comply with international rules of cooperation in the maritime dimension.
Vitalii Dankevych, Fellow, Democratic Resilience, Center for European Policy Analysis
Blocking Ukrainian ports and stopping food exports from Ukraine became one of the key global challenges in the context of Russian aggression against Ukraine.
It is important to emphasize the humanitarian role played by the “Grain Corridor,” especially in the context of food supplies to countries in Africa and Asia. Regarding the geographical structure of exports, the share of Africa in the total structure of wheat shipments is more than 27 percent. And 23 percent of wheat was exported to countries suffering from a humanitarian crisis. As part of the UN World Food Programme, six ships with 190,080 tons of cargo left Ukrainian ports.
The grain agreement had a positive effect on world food prices and is a kind of market indicator. The reduction in the cost of food and the increase in its availability, thanks to the grain initiative, have had a positive effect on overcoming the current challenges of the global food crisis. Food becomes more accessible to those who are one step away from a humanitarian disaster.
The “Grain Corridor” also had a positive impact on the economic situation of farmers in Ukraine. Improving exports made it possible to obtain funds for harvesting late crops—including sunflower, soybeans, and corn—and to partially form the necessary reserves for spring fieldwork. Accordingly, the preservation of the “Grain Corridor” is key for Ukraine. It is important for the entire Ukrainian economy. Export statistics show that from September to October 2022, 65 percent of all Ukrainian exports were agricultural products.
The experience of October and November 2022 showed that the stable operation of the corridor allows exporting of 6-7 million tons of products per month. If such volumes are realized, then this is enough for Ukrainian producers, as well as to ensure international food security. At the same time, Russia is constantly trying to slow down the work of the “Grain Corridor,” so it does not work in full.
As practice has shown, the only guarantee of safety in the Black Sea and food safety in the world is a strong and well-armed Ukrainian Navy and joint patrolling of the Black Sea by NATO ships.
Russia suspending its participation in the “Grain Initiative” does not come as a surprise. Moscow has long chastised the agreement as not matching its interests, tried to attach additional demands to it, characterized it as unfair, and as one that does not really bring relief to the starved regions of the world.
Yet, it did bring such relief to the world food prices, and it surely brought some relief to the parts of the Ukrainian economy. This one last thing irritated Moscow, as part of their war on Ukraine has been strangling the latter’s economy. One needs to note here that the “grain deal” has not worked well for a while now. Russia made sure some Ukrainian ports were basically excluded, created huge backlogs with ships inspection, and so on.
The question now is, what next? And the really big question is whether supplies can be maintained without, or even despite, Russia? Russia left the agreement briefly in November 2022. Other parties to the deal – Ukraine, Turkey, and the UN – went on despite this. The ships’ passage increased manifold. Moscow felt like it cheated itself, put itself in an awkward position, and came back. In a way, it is easier for them to control or unravel the execution of the deal while in rather than while being out.
I do not think that they would come back now, not soon, for sure. First, they would try to see their demands met. Ultimately, Russia seeks normalization. In the meantime, Russia’s ability to actually enforce the blockade and interrupt trade by force is limited now. Their naval assets cannot get close to the Ukraine coast. The most recent Ukrainian attack on the Kerch Strait Bridge reminded us that Russia is not in full control of the sea. They would hardly dare to intern/attack cargo ships in international waters, involving themselves in acts of piracy.
What they can do is continue striking Ukraine ports and other onshore infrastructure with missiles and drones. In fact, the “grain deal” was signed on July 22, 2022, and the very next day, a Russian missile strike hit Odesa port. So, the question is not really about whether military convoys will inspect the cargo ships but more about how these attacks and resulting volatility might unravel trade insurance and therefore cripple the trade. What would be the position of Turkey now? There are some interesting dynamics there of late. Can there be a way forward without Russia in the deal? We are going to see some answers soon.
Antonia Colibasanu, Senior Geopolitical Analyst and Chief Operating Officer, Geopolitical Futures
Russia ended its participation in the grain deal as long as its conditions are not met. Considering that one of the Kremlin’s demands is that one of its banks be banks reconnected to the Swift payments system, it looks like the sanctions have started to bite, and the Russian economy is, after all, not doing as well as Putin and his aides want the world to think. After all, the Kremlin has long proclaimed the creation of a parallel system that was supposedly securing its trade links to the world.
However, there is reason for concern about Russia’s economic troubles. Traditionally, the weaker Russia gets, the more aggressive it becomes. Since it has been unable to force the West to negotiate and accept its terms, Russia apparently has haughtily delivered a three-month ultimatum for the West to “resolve its demands”
Meanwhile, Moscow shows its true colors in the Black Sea by launching nightly attacks on Odesa and its grain facilities, while warning that it will regard all ships heading for Ukrainian ports as carriers of military-purpose cargoes. Russia’s decision has effectively reinstalled the blockade and turned the Black Sea into a heightened-risk war zone (as if a war-zone category wasn’t enough.).
The shipping sector and the insurance industry are currently trying to come up with creative ideas to tackle the uncertainty. The Lloyd’s of London insurance market has already placed the Black Sea region on its high-risk list. Lloyd’s of London insurer Ascot led the marine cargo and war facility provided up to $50m per cargo. However, on July 18, Ascot said that the insurance facility is “on pause”, noting indirectly that they expect Russia may return to the deal.
Russia’s decision of growing military operations in Southern Ukraine while withdrawing from the grain deal has a long-term goal. It unbalances Ukraine, the West, and NATO Black Sea neighbors like Romania, and could have further effects through a potential food supply crisis for the world. Grain and wheat prices are already spiking.
With no industry to rely on (most of the Ukrainian industry was located in the East of the country, under Russian domination at the moment) and no functioning agriculture — worth 40% of Ukrainian GDP — there isn’t much of a national economy to rely on.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.
