The Black Sea Grain Initiative has been renewed – for now. Credit: Ihor Oinua/Unsplash
  • by Alexander Kozul-Wright (Geneva)
  • Interpress service

The price disturbances were particularly severe for “soft” agricultural commodities. In peacetime, Russia and Ukraine produced a large amount of the world’s grain, supplying 28 percent of the world’s traded wheat and 75 percent of sunflower products. Before the war, they were also among the world’s leading suppliers of barley and corn.

After the start of hostilities, the export of grain was seriously disrupted. For four months, Russian military ships blockaded Ukrainian ports. Supply constraints triggered market volatility and price increases. Wheat, for example, reached a record in March 2022. This left millions of people, especially in developing countries, on the front lines of a food crisis.

Then, in July 2022, two agreements were signed: one was a memorandum of understanding between the United Nations and Moscow to facilitate global access for Russia’s food and fertilizer exports; the other was the Black Sea Grain Initiative (BSGI), signed by Russia and Ukraine, which facilitated the safe export of grain and other foodstuffs from Ukrainian ports via the Black Sea.

Mediated by the UN and Turkey, the BSGI opened a protected sea corridor through Ukraine. The agreement eased concerns over global grain supplies and led to a drop in prices. Over 900 ships with grain and other foodstuffs have left Ukraine’s major ports since last summer.

Before the conflict, between 5-6 million tons of grain were exported from Ukraine’s ports every month, according to the International Grains Council. By the end of 2022, Ukraine had once again reached its historical export capacity (of just under 5 million tons). Production responses elsewhere also helped boost global supply.

Nevertheless, Ukrainian exports to developing countries are below pre-war levels. And while the unblocking of the trade corridor helped address food insecurity in 2022, export backlogs were significant. Today, grain prices (although they have fallen in recent months) remain high.

Against this background, negotiations between UN officials and Russia’s representatives – led by Deputy Foreign Minister Sergei Vershinin – started in Geneva on Monday on a possible extension of the BSGI. After a four-month renewal last year, the agreement was set to expire on March 18Th.

Earlier this month, UN Secretary-General Antonio Guterres highlighted the importance of the agreement. He emphasized that “it helped lower global food costs and offered critical relief to people…, especially in low-income countries.” Ukraine’s president, Volodymyr Zelensky, also called for the initiative to be extended.

For their part, Russian officials argued that “hidden” sanctions – targeting fertilizer companies and the country’s largest agricultural bank – have undermined commodity exports. By way of background, certain Russian food and fertilizer products were exempted after Western sanctions first targeted the Kremlin in February 2022.

In Geneva, delegates emphasized that the survival and market avoidance of private companies had led to the undercutting of Russian commodity exports. They noted that sanctions against its payment, logistics and insurance systems created an obstacle for Moscow to sell its grain and fertilizers on international markets.

In response, they requested that national jurisdictions improve exemption clarifications for food and fertilizer products. “I think it’s a fair request,” said Jayati Ghosh, a professor of economics at the University of Massachusetts, Amherst. “Hidden Sanctions Impede Russian Financial Transactions and Undermine Purportedly Exempt Exports.”

When BSGI was last renewed in November, Russia threatened to withdraw from the deal unless hidden sanctions were addressed. Although they eventually agreed to an extension, Moscow has since insisted that its own agricultural exports (particularly ammonia) be included in the BSGI as a condition for its renewal.

According to the agreement’s most recent iteration, Russia’s condition above all went unaddressed. Moscow, in turn, agreed to extend the agreement by just two months. Ukraine, meanwhile, has made conflicting statements on the matter. Over the weekend, Deputy Prime Minister Oleksandr Kubrakov tweeted that the agreement had been extended by four months.

So far, the UN has not specified the length of the renewal, but “this may be the last time an extension is agreed upon,” according to Ghosh. “Russia will probably use this latest agreement as a threat. Rejecting a third extension in the spring could force the international community to listen to their concerns.”

IPS UN agency report

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© Inter Press Service (2023) — All rights reservedOriginal source: Inter Press Service