June 16 (Reuters) – President Vladimir Putin said this
month that Russia was considering withdrawing from the Black Sea
grain deal as he accused the West of cheating Moscow because it
still faced obstacles getting its own agricultural goods to
world markets.
Putin said he would discuss the future of the grain deal
with visiting African leaders on Saturday.
THE PACKAGE DEAL
The United Nations and Turkey brokered the Black Sea Grain
Initiative last July to help tackle a global food crisis
worsened by Moscow’s invasion of Ukraine and blockade of its
Black Sea ports.
It allows food and fertilizer to be exported from three
Ukrainian ports – Chornomorsk, Odesa and Pivdennyi (Yuzhny). The
deal has been extended three times, most recently until July 17.
Nearly 32 million tonnes of mostly corn and wheat have so
far been exported by Ukraine under the deal. The initiative also
allows for the safe export of ammonia – a key ingredient in
nitrate fertilizer – but none has been shipped.
To convince Russia to agree to the initiative, a three-year
pact was also struck last July in which the United Nations
agreed to help Moscow overcome any obstacles to its own food and
fertilizer shipments.
While Russian exports of food and fertilizer are not subject
to Western sanctions imposed after the February 2022 invasion of
Ukraine, Moscow says restrictions on payments, logistics and
insurance have amounted to a barrier to shipments.
U.N. spokesperson Stephane Dujarric said last week that “the
past months have shown tangible progress” on improving Russian
exports, but added: “Challenges remain but we will spare no
effort to overcome all remaining obstacles.”
WHY WERE THE DEALS NEEDED?
The poorest in the world were hit worst by the rising global
food prices. The U.N. World Food Programme (WFP) warned in March
last year that its ability to feed some 125 million people was
under threat because 50% of its grain came from Ukraine.
Between 2018-2020, Africa imported $3.7 billion in wheat
(32% of total African wheat imports) from Russia and another
$1.4 billion from Ukraine (12% of total African wheat imports),
according to the United Nations.
The United Nations said last year that 36 countries count on
Russia and Ukraine for more than half of their wheat imports,
including some of the poorest and most vulnerable, including
Lebanon, Syria, Yemen, Somalia and Democratic Republic of Congo.
Under the Black Sea grain deal, more than 625,000 tonnes of
grain has so far been shipped by the WFP for aid operations in
Afghanistan, Ethiopia, Kenya, Somalia and Yemen. In 2022, WFP
procured more than half its global wheat grain from Ukraine.
RUSSIAN COMPLAINTS
Putin complained that Russia has been cheated by the West
because its own exports still faced problems.
The United States has dismissed Russia’s grievances. U.S.
Ambassador to the U.N. Linda Thomas-Greenfield said last month:
“It is exporting grain and fertilizer at the same levels, if not
higher, than before the full scale invasion.”
Putin said Russia only agreed to the deal for the sake of
countries in Africa and Latin America but that only around
3.2-3.4% of the grain goes to the world’s poorest countries
while 40% went to prosperous countries.
According to U.N. data, around 3% of exports under the Black
Sea deal has gone to low-income countries, while high income
countries get around 44% and the rest to middle-income states.
The United Nations has always said the deal was a commercial
enterprise and not intended to be entirely humanitarian, but
that it benefited poorer countries by helping lower food prices
globally.
RUSSIA’S DEMANDS
In a letter to U.N. officials in March, Russia spelled out
the demands it wants met in exchange for its continued
cooperation in the grain deal:
– Moscow wants the Russian Agricultural Bank (Rosselkhozbank)
reconnected to the SWIFT payments system. The bank was cut off
from SWIFT by the European Union in June last year over Russia’s
invasion. An EU spokesperson has said the bloc is not
considering the reinstatement of Russian banks.
As a workaround, U.N. officials got U.S. bank JPMorgan Chase
& Co JPM.N to start processing some Russian grain export
payments with reassurances from the U.S. government.
The United Nations is also working with the African
Export-Import Bank (Afreximbank) to create a platform to help
process transactions for Russian exports of grain and fertilizer
to Africa, the top U.N. trade official told Reuters last month.
Russia wants the resumption of its Black Sea ammonia exports
via a pipeline from Russia’s Togliatti to Ukraine’s Pivdennyi
port. The pipeline, which pumped up to 2.5 million tonnes of
ammonia annually, was shut down by the war.
In September, Reuters reported that the U.N. proposed that
Russian fertilizer producer Uralchem sell its ammonia to
U.S.-headquartered commodities trader Trammo once it reaches the
Russia-Ukraine border via the pipeline.
Until the ammonia pipeline is restarted, Moscow has said it
will limit the number of vessels allowed to travel to Pivdennyi
port under the Black Sea grain deal. U.N. data shows no ships
have visited Pivdennyi port for more than a month.
Last week Russia accused Ukrainian forces of blowing up part
of the pipeline, the world’s longest carrying ammonia, in
Ukraine’s Kharkiv region. The regional Ukrainian governor said
Russia had shelled the pipeline. Neither side provided evidence.
More than 400,000 tonnes of Russian fertilizer was also
initially stranded in European Union ports after the war
started, though U.N. officials have negotiated its release for
export to Africa after Russia said it would be donated.
Russia also wants a resumption of supplies to Russia of
agricultural machinery and spare parts; lifting restrictions on
insurance and access to ports for Russian ships and cargo; and
unblocking accounts and financial activities of Russian
fertilizer companies.
RUSSIAN GRAIN, FERTILIZER EXPORTS
While exports of Russian wheat and some fertilisers have
risen since the war, exports of Russian ammonia and
potassium-based fertilizers have plummeted.
In the 2021-22 season, Russia exported 38.1 million tonnes
of grain, including 30.7 million tonnes of wheat, while in the
2022-23 season, Putin said Russia is expected to export around
55-60 million tonnes of grain – likely to be a record.
According to the U.S. Department of Agriculture, Russia’s
main wheat export markets are in the Middle East and Africa and
exports to all regions have increased in the 2022-23 period.
While Russian exports of urea and potassium-based
fertilisers diammonium and monammonium phosphate rose from
Russia, exports of potassium-based fertiliser muriate of potash
(MOP) fell 37% in 2022, according to trade data.
(Reporting by Reuters staff; Editing by Daniel Wallis)
