On July 17, Russia carried out its threat and withdrew from the grain deal, which ensured the transportation of Ukrainian grain from the Black Sea ports. The press secretary of the Russian President Dmitry Peskov told reporters: “In fact, the Black Sea agreements ceased to be valid today. <...> Unfortunately, the part relating to Russia in this Black Sea agreement has not been implemented so far. Therefore, its action is terminated.
In recent days, Russian leader Vladimir Putin himself has warned that Moscow will not agree to extend the agreement . “We voluntarily extended this so-called deal many times. <...> Well, that's enough, after all," he said on July 13.
In accordance with the deal, Russia agreed to the creation of a security corridor in the Black Sea for the EXPORT of Ukrainian grain from three Ukrainian ports - Odessa, Chernomorsk, Yuzhny. In turn, the UN secretariat was supposed to achieve an easing of the sanctions regime in relation to Russian supplies of food and fertilizers to the world market .
Moscow suspended its participation in the agreement less than a week before the anniversary of its conclusion and two weeks before the Russia-Africa summit. The countries of the African continent were named by all parties to the agreement as the main beneficiaries of the Black Sea agreement.
At the same time, Turkish President Recep Tayyip Erdogan announced several times the extension of the grain deal. This July, he also expressed the hope that it would be extended. “Russia extended this deal several times solely in order to help Erdogan's friend, it was almost not hidden. Since the goal was achieved - he was re-elected to the presidency, this aspect was gone, and on other issues, Russia has long expressed its dissatisfaction. Therefore, there should not be any sensation here. Another thing is that Russian representatives made evasive statements, which created the impression that there was some kind of bargaining going on, but if it did, it did not lead to anything,” says Fyodor Lukyanov, editor-in-chief of Russia in Global Affairs magazine. .
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Two documents were signed - "Memorandum of Understanding between the Russian Federation and the UN Secretariat on Facilitating the Promotion of Russian Food and Fertilizers to World Markets" and "Initiative for Safe Transportation of Grain and Food from Ukrainian Ports".
The parties signed them separately: each of the countries signed it with Turkey and the UN. The agreement was signed by Russian Defense Minister Sergei Shoigu, Turkish National Defense Minister Hulusi Akar and UN Secretary General António Guterres. From Ukraine, the document was signed by Minister of Infrastructure Oleksandr Kubrakov.
The deal was extended three times - November 17, 2022 (for 120 days), March 18 and May 17, 2023 (for 60 days each time).
Is there a possibility of reopening the deal?On July 15, the Russian president discussed a grain deal with South African President Cyril Ramaphosa in a telephone conversation. Putin drew attention to the fact that "the main goal of the deal, namely the supply of grain to countries in need, including on the African continent, has not been realized." There are no reports on the content of the conversation on the website of the President of South Africa, but it is indicated that he also discussed the grain initiative with Guterres and Zelensky.
By suspending participation in the agreement, Moscow does not completely renounce it. “We will extend. Exactly at the moment when the promises given to us will be fulfilled, ”Putin specified. “Only upon receipt of concrete results, and not promises and assurances, will Russia be ready to consider restoring the deal,” the Russian Foreign Ministry said on July 17.
In accordance with the memorandum, the UN Secretariat was to achieve specific exemptions for food and fertilizers produced in Russia, including raw materials for their production (including ammonia), from sanctions measures. In particular, Russia demanded guarantees for the supply of ammonia through the Togliatti-Odessa ammonia pipeline. But it was blown up on June 5 on the territory of the Kharkov region of Ukraine, and Russia did not get the opportunity to repair it.
Russia also demanded that Rosselkhozbank be restored to the ability to conduct settlements through the SWIFT system. But the European Union did not agree to this, pointing out that there are other methods of payment. As an alternative, the UN asked the American JPMorgan to process some payments related to the export of Russian grain, and the option of connecting a subsidiary of the Russian Agricultural Bank to SWIFT was discussed. “The feverish, last-minute proposal of the UN Secretary General about some options with access to SWIFT for a subsidiary or affiliated with our bank is practically unrealizable and unviable – according to our data, this is recognized in the European Union,” the Russian Foreign Ministry skeptically assessed Guterres’s efforts. . There was no progress in allowing the import of spare parts and equipment for the production of agricultural products and fertilizers into Russia.
“Russia has put forward certain demands . They, presumably, have not been fulfilled. And suddenly changing your mind is unlikely. Moreover, the atmosphere is becoming more and more unfavorable for this every day (as an example, the emergency on the Crimean bridge on July 17),” says Lukyanov.
“There is no formal grain deal as such – it is more of a media stamp. There is a Belousov-Guterres memorandum for a period of three years, which was signed on July 22, 2022. Russia did not come out of it. There is the Black Sea Grain Initiative, to which Russia can return under certain conditions. But she will not rush into this return, because she does not see progress in the implementation of the Belousov-Guterres memorandum,” says Andrey Maslov, DIRECTOR of the HSE Center for African Studies.
Ukraine has already declared its readiness to continue work on the export of grain with the support of the UN and Turkey. “If Ukraine lets go, and Turkey lets them through, everyone is ready to continue deliveries of grain,” his press secretary Sergei Nikiforov quoted the Ukrainian president as saying.
How did the grain market react?
The parties assess the effectiveness of the grain deal differently. On July 17, the Russian Foreign Ministry once again stated that the exported grain, contrary to the declared humanitarian goals, was sent to countries with high and upper middle income levels, including EU countries, and to the poorest countries, in particular Ethiopia, Yemen, Afghanistan, Sudan and Somalia , accounted for less than 3% of the exported food, a little more than 900 thousand tons (in total, 32.8 million tons of cargo was exported by the Black Sea route).
The UN emphasized that the goal of the work on the export of Ukrainian grain is to maintain stability in the world market. “The UN-brokered Black Sea Grain Initiative is bringing much-needed grain back to global markets and driving down the price of staple foods around the world,” the UN and World Food Program said in a statement.
World wheat prices began to rise sharply after Russia announced that the grain deal had stopped. Wheat futures for September delivery rose 4.24% to $6.89 per bushel (about 30 kg), according to trading data on the Chicago Mercantile Exchange as of 12:06 Moscow time on Monday.
Andrey Sizov, CEO of the Sovecon analytical center, said that after the suspension of Russia's participation in the grain deal, world grain prices will continue to grow "at least in the coming days." In his opinion, this, in turn, will lead to an increase in export prices for Russian wheat in dollars and an increase in prices for wheat in ports in rubles.
President of the Russian Grain Union Arkady Zlochevsky believes that the suspension of Russia's participation in the grain deal will not affect Russian farmers in any way, since "this deal has never given us anything but damage." According to him, Russian agrarians, on the contrary, are now benefiting, since the deal "damaged Russian grain supplies from the very beginning of its implementation." “Now there is a chance, if the deal is not implemented, that this damage will at least be reduced, and at the maximum it will disappear altogether,” Zlochevsky hopes. “During the implementation of this deal, we supplied our grain at a discount that ranges from $10 to $20 per ton at the moment, and sometimes reached $70 per ton,” he explained in a conversation with RBC.
Dmitry Leonov, deputy chairman of the board of the Rusprodsoyuz association, believes that Russia's withdrawal from the grain deal will not significantly affect the Russian market, since Russia actually received nothing from it. “Plus, during the time of sanctions, we managed to reorganize grain exports , including through the Caspian Sea and Iran,” says Leonov. “In addition, Russia-friendly countries, including CHINA , Egypt and others, can increase purchases of Russian grain. Nothing prevents Russian farmers from increasing the export of falling Ukrainian grain volumes to Turkey, because due to logistics, the supply of Russian products will ultimately turn out to be cheaper than from other countries,” the expert added.
How the decision will affect Russia's relations with partnersTwo of its closest allies, Turkey and China, urged Moscow to extend the deal. The Chinese Foreign Ministry issued a statement in support of the agreement. "China hopes that the grain transportation initiative will continue to be fully implemented, and is ready to work more closely with all parties to reach agreements to ensure world food security," Chinese Foreign Ministry spokeswoman Mao Ning said on July 17.
European Commission President Ursula von der Leyen called Russia's decision a cynical step. If Russia pulls out of the agreement, "the rest of the world will look at it and say that Russia has turned its back on the fact that countries in the global South and Africa, Latin America and Asia can get the food they need at affordable prices," a presidential adviser said on July 16 US Homeland Security Officer Jake Sullivan.
“Now there will be a very clear campaign in the West: Russia is the culprit of the food security crisis. In this context, it is important for it to triple its efforts in direct contacts with all countries in need - primarily with African ones - in order to offer them alternatives. If this cannot be done, then we will have to keep saying that it is not our fault,” Lukyanov warns. In his opinion, the issue of grain supplies to Moscow and African countries will definitely have to be discussed at the Russia-Africa summit.
“In the media field, the thesis that Russia has undermined stability in the world food markets will be accelerated. But here it is much more important to evaluate the long-term effect and look at the transfer of trading from spot to long-term contracts. This is what Africans will be waiting for - they are not interested in the spot price of grain, but in the availability of grain for them, that is, the conditions in contracts, deferrals, payments, ”Maslov believes. He expects that food security is likely to be one of the main topics at the Russian-African forum. “The transition to discussing bilateral deals will be a meaningful response. Russia's exit from the grain deal was predictable, and I think it did not come as a surprise to Africans - they understand Russian motives, ”the expert sums up.