Ukraine grain deal extended in a win for food security: Erdoğan

BY AGENCIES

A critical deal allowing Ukraine to safely export grain via the Black Sea has been extended for another two months thanks to Türkiye’s engagement, President Recep Tayyip Erdoğan announced Wednesday, marking a crucial step for global food security.

The announcement came after the last ship departed from a Ukrainian port under the landmark wartime pact that was due to expire Thursday. Russia threatened to withdraw from the initiative due to obstacles it says are hindering its shipments of grain and fertilizers.

According to data issued by the United Nations, the DSM Capella has left the port of Chornomorsk carrying 30,000 tons of corn and was on its way to Türkiye.

The breakthrough accord was brokered by the U.N. and Türkiye with the warring sides last summer to help tackle a global food crisis aggravated by Moscow’s invasion of Ukraine, one of the world’s leading grain exporters. The pact came with a separate agreement to ease shipments of Russian food and fertilizer that Moscow insists hasn’t been applied.

“Thanks to the efforts of our country and the contributions of our Russian and Ukrainian friends, it was decided to extend the agreement for another two months,” Erdoğan said in televised remarks from the capital Ankara.

Russia’s Foreign Ministry Spokeswoman Maria Zakharova confirmed the extension of the deal, saying that it was done to help the countries in need.

Meanwhile, Ukraine welcomed the extension, but said it must work effectively.

With a similar extension in the balance in March, Russia unilaterally decided to renew the deal for just 60 days instead of the 120 days outlined in the agreement.

U.N. officials and analysts warned that a failure to extend the Black Sea Grain Initiative could hurt countries in Africa, the Middle East and parts of Asia that rely on Ukrainian wheat, barley, vegetable oil and other affordable food products, especially as drought takes a toll. The deal helped lower prices of food commodities like wheat over the last year, but that relief has not reached kitchen tables.

Turkish officials earlier Wednesday expressed optimism and said the deal was set to be extended.

Senior officials from Russia, Ukraine, Türkiye and the U.N. met in Istanbul last week to discuss the Black Sea pact. On Tuesday, U.N. spokesperson Stephane Dujarric said: “Contacts are going on at different levels. We’re obviously in a delicate stage.”

Foreign Minister Mevlüt Çavuşoğlu said last week he thought the deal could be extended for at least two more months.

Ukrainian Deputy Prime Minister Oleksandr Kubrakov said the grain deal “should be extended for a longer period of time and expanded” to “give predictability and confidence” to markets.

Moscow said it opposes broadening or indefinitely expanding the deal.

While Russian exports of food and fertilizer are not subject to Western sanctions imposed following the February 2022 invasion of Ukraine, restrictions on payments, logistics and insurance have amounted to a barrier to Russian shipments.

The United States has rejected Russia’s complaints. U.S. Ambassador to the U.N. Linda Thomas-Greenfield claimed last week: “It is exporting grain and fertilizer at the same levels, if not higher, than before the full-scale invasion.”

Risks

Officials from Russia, Ukraine, Türkiye and the U.N. make up a Joint Coordination Centre (JCC) in Istanbul, which implements the Black Sea export deal. They authorize and inspect ships. However, no new vessels have been approved by the JCC since May 4.

JCC officials inspect authorized ships near Türkiye before traveling to a Ukrainian Black Sea port via a maritime humanitarian corridor to collect their cargo and return to Turkish waters for a final inspection.

Some 30.3 million tons of grain and foodstuffs have been exported from Ukraine under the Black Sea deal, including 625,000 tons in World Food Programme (WFP) vessels for aid operations in Afghanistan, Ethiopia, Kenya, Somalia and Yemen.

“If you have a cancellation of the grain deal again when we’re already at a pretty tight situation, it’s just one more thing that the world doesn’t need, so the prices could start heading higher,” said William Osnato, a senior research analyst at agriculture data and analytics firm Gro Intelligence.

“You don’t see relief on the horizon.”

Russia has five main asks, according to Russian Ambassador in Geneva Gennady Gatilov:

– A restoration of foreign supplies of farm machinery and replacement parts.

– A lifting of restrictions on insurance and access to foreign ports for Russian ships and cargo.

– Resumed operation of a pipeline that sends Russian ammonia, a key ingredient in fertilizer, to a Ukrainian Black Sea port.

– An end to restrictions on financial activities linked to Russia’s fertilizer companies.

– Renewed access to the international SWIFT banking system for the Russian Agricultural Bank.

The U.N. says it’s doing what it can, but those solutions mainly rest with the private sector, which has little leverage.

‘Catastrophic’ ripple effects

Osnato, the analyst, said markets weren’t reacting to Russia’s threats to exit the deal, with wheat recently hitting two-year lows. He said that if the agreement wasn’t extended or negotiations drag on, the “loss of Ukraine grains wouldn’t be a disaster” for a month or two.

He says there is “bluster” coming from Russia to push for easing some sanctions because it’s shipping record amounts of wheat for the season, and its fertilizers are flowing well, too.

“It’s more about trying to get a little leverage, and they’re doing what they can to put themselves in a better negotiating position,” Osnato claimed.

Trade flows tracked by financial data provider Refinitiv show that Russia exported just over 4 million tons of wheat in April, the highest volume for the month in five years, following record or near-record highs in several previous months.

Exports since last July reached 32.2 million tons, 34% above the same period from last season, according to Refinitiv. It estimates Russia will ship 44 million tons of wheat in 2022-2023.

The issue is more pressing with Ukraine’s wheat harvest coming up in June and the need to sell that crop in July. Not having a Black Sea shipping corridor at that point would “start taking another large chunk of wheat and other grains off the market,” Osnato said.

Ukraine can send its food by land through Europe so that it wouldn’t be completely cut off from world markets, but those routes have a lower capacity than sea shipments and have stirred disunity in the European Union.

Uncertainties like drought in places including Morocco, Tunisia, Algeria, Syria and East Africa – big importers of food – are likely to keep food prices high, and an end to the U.N. deal wouldn’t help.

“Any shock to the markets can cause massive harm with catastrophic ripple effects in countries balancing on the brink of famine,” said Shashwat Saraf, emergency director for East Africa at the International Rescue Committee.