What was the Black Sea grain deal and why did it collapse?

What was the Black Sea grain deal?

The Black Sea Grain Initiative was negotiated in July 2022 between Turkey, the UN and Russia as a way to ensure that Ukraine, one of the world’s breadbaskets, could ensure that its grain could leave its southern ports via the Bosphorus. The grain could not be exported in the required quantities using the alternative methods of road or rail through Poland or by canal and river through Romania.

Turkey got involved because of the close relationship between its president, Recep Tayyip Erdoğan, and Vladimir Putin and because under the Montreux convention signed in 1936 it oversees maritime traffic in the Bosphorus and Dardanelles straits.

What did the grain deal promise?

The initiative, one of the few diplomatic achievements since the war began, allows for the commercial export of food and fertilizer (including ammonia) from three key Ukrainian Black Sea ports: Odessa, Chornomorsk and Pivdennyi (formerly known as Yuzhny). Ukrainian ships guide cargo ships into the international waters of the Black Sea, avoiding mined areas. The ships then head towards Istanbul along an agreed maritime humanitarian corridor. Ships heading to and from Ukrainian ports are inspected by teams made up of Russian, Turkish, Ukrainian and UN inspectors. Along with this memorandum, a separate agreement was signed that minimizes the impact of sanctions on the export of Russian food and fertilizer. Both memoranda were subject to revision every four and then every two months.

Was it successful?

Despite the acute lack of confidence, 33 million tons of grain left Ukraine’s ports in the year to July. The UK says about 61% of that went to low- and middle-income countries, and only 65% ​​to wheat. The World Food Program bought some 750,000 tons of Ukrainian grain that was immediately shipped to places like Afghanistan, Ethiopia, Somalia and Sudan. Partly as a result of this, the price of grain per bushel stabilized at $800 (£620), down from a high of $1,360.

Russia claims that the proportion of the grain that went to the poorest countries was less than 4%, but this ignores the fact that even if the richest countries bought the wheat, the additional supply depressed the overall price paid by all countries.

What started to go wrong?

Russia began to slow down inspections. In October 2022, 10 ship inspections per day were completed, meaning 4.2 million metric tons remained that month, falling to seven per day in November and two in May, when only 1.3 million metric tons remained. The UN had the capacity to inspect up to 40 ships per day.

Compared to March 2023, there was a 29% decrease in food exports per tonnage through the initiative in April and a 66% decrease in May. Russian finished the deal this week.

Why did it start to go wrong?

In essence, Russia felt that the second part of the agreement allowing for more Russian agricultural exports was not being respected by the West. The UK says Russia’s food export levels are higher than last year and it is exporting a large amount of grain and fertilizer from Novorossiysk. But Moscow says sanctions on exports of Russian goods have not been lifted clearly enough to give wary insurers the legal peace of mind to insure Russian food-carrying ships. It also wanted sanctions on its main agricultural bank lifted. Other demands include the resumption of supplies of agricultural machinery and parts, the resumption of the Togliatti-Odesa ammonia pipeline, and the unblocking of assets and accounts of Russian companies involved in the export of food and fertilizers.

Who is to blame for the situation?

The West claims that Putin thought the deal was not worth keeping as it was allowing Ukrainian coffers and farmers to profit from their grain exports. UN Secretary General António Guterres was making genuine efforts to meet Putin’s demands.

The West acknowledges that cereal exports to less developed countries were not returning at the desired pace. In the case of wheat, there was a drop in exports of 11.8 million tons in 2022 from the previous year, equivalent to the annual wheat food consumption of 175 million people, roughly the population of Bangladesh. For corn and barley, the export gap is as large as 41% and 82%, respectively, of the previous year’s level. Nearly 8 million tons of goods were shipped to China, nearly 25% of the 32.9 million tons exported, while nearly 44% of exports went to high-income countries.

What happens next?

The Russian Defense Ministry has said in effect that any ship leaving a Ukrainian port will be a legitimate military target. NATO member Turkey could threaten to confront Russia by guiding grain exports out of ports without Russian permission, but that is a high-risk step. Putin has hinted that he is willing to return to the deal if his demands are met. But the bombing of the port of Odessa suggests that his suggestion of flexibility may be designed to stop a possible loss of political support in the global south.

Most likely, according to analysis firm Smartcube, a drop in exports will lead to increased reserves in Ukraine and could force farmers to reduce planting in the 2023-24 season. Russia could raise the export tax on wheat to finance its military campaign in Ukraine and eventually the fertilizer shortage could intensify as Russia, along with Belarus, is one of the world’s largest sources of mineral fertilizers. Both countries account for approximately 14% of the world’s fertilizer production and exports.

Leave a Comment