The agreement that has allowed the safe export of grain to the Black Sea from Ukraine for the past year will expire at the end of this Monday after Russia announced that it was suspending its participation after noting that commitments with the Russian side had not been met. All this on the same day that the Kerch bridge, which links the occupied Ukrainian peninsula with Russia, was allegedly attacked by Ukraine, according to unidentified Ukrainian intelligence sources.
"As soon as the Russian part" of the agreements is fulfilled, Russia "will immediately re-implement this agreement," Kremlin spokesman Dmitri Peskov said in his daily telephone press conference, who denied that the suspension of the pact was related to the attack. perpetrated this morning against the Crimean bridge. "These are events that are not linked in any way," he said when asked about that point.
Russia had long been announcing that there was no reason to extend the deal. The breaches to which the Kremlin spokesman referred are the reconnection of the Russian agricultural bank, Rosseljozbank, to SWIFT, the lifting of sanctions on spare parts for agricultural machinery, the unblocking of logistics and transport insurance, the unfreezing of assets and the resumption of the Togliatti-Odesa ammonia pipeline, which exploded on June 5.
These Russian aspirations are contained in a memorandum signed between Russia and the UN, which Moscow considers mandatory for the implementation of the grain agreement. While Russian exports of food and fertilizer are not subject to Western sanctions imposed after the Russian invasion, Moscow has said restrictions on payments, logistics and insurance represent a barrier to shipments.
Ukraine is a major producer of grains and oilseeds, and the disruption of its exports at the outbreak of the war pushed world food prices to record levels. The deal, negotiated by the United Nations and Turkey last July, helped bring down prices that reached record levels after the start of the Russian invasion five months earlier. Thus, it alleviated the world food crisis that the blockade of grain in the Ukrainian ports of the Black Sea had caused. Since then the pact has been renewed three times, times when Moscow threatened to paralyze it.
Grain from Ukraine has also played a direct role with 725,200 tonnes, or 2.2%, of supplies sent through the corridor used by the United Nations World Food Program (WFP) to aid countries such as Ethiopia, Somalia and Yemen.
The news that Russia was going to suspend its participation in the agreement has already pushed up the prices of grains and oilseeds. As a consequence, the increase will cause prices for staple foods, such as bread and pasta, to rise in the coming months. The situation, however, is better than in the months after the start of the war, as grain supplies from other producers such as Brazil have increased.
Prices for wheat, the main ingredient in bread, have fallen about 14% so far this year and corn is down about 23%.
However, the current global food crisis is far from over. WFP reported last month that multiple emergencies had overlapped, resulting in the largest and most complex hunger and humanitarian crisis in more than 70 years. In 2022, a record 349 million people experienced acute hunger and 772,000 were on the brink of famine, according to this body.
Global corn stocks started the 2021-2022 season at a six-year low, so Russia's invasion of Ukraine, one of the world's top corn exporters, caused a significant rise in prices. However, a strong increase in exports from Brazil has since helped boost supplies along with the export of almost 17 million tons of corn through the corridor.
In this sense, the US Department of Agriculture has forecast that world corn stocks by the end of the 2023-24 season will be at their highest point in five years.
The situation for wheat will be more critical than for corn. Global stocks of this grain are tighter and are forecast to be at an eight-year low by the end of the 2023-24 season, USDA data shows.
Ukraine provided WFP with 20% of total food purchases in 2021, mainly wheat and split peas. Most of the food goes to Africa along with some West Asian countries such as Yemen, so WFP tends to source most of its supplies from Eastern Europe, which is closer than major North American producers. or from the South.
WFP has shipped 725,200 metric tons through the Black Sea corridor this year. If it stalls, it will have to look elsewhere, potentially at higher cost when a funding shortfall has already forced it to scale back activities in some countries.
Ukraine has exported about 33 million tons of cereals, including 16.9 million tons of corn and 8.9 million tons of wheat. But the flow of grain may be coming to an end: the last ship in the deal left the Ukraine on Sunday.
