Russia-Ukraine Black Sea Grain Export Agreement Not Renewable

tendata blogTrade Trends News

ten data blog17-07-2023

The last ship sailing under a U.N.-brokered agreement that allows Ukrainian food security to be exported to the Black Sea left the port of Odessa early Sunday ahead of a deadline to extend the deal, according to Reuters witnesses and MarineTraffic.com.


Russia has not agreed to register any new ships since June 27, and the program expires Monday unless Moscow agrees to an extension.


Russia has threatened not to extend its grain deal with Ukraine after its July 17 expiration.


Last year, the deal enabled Ukraine to safely export more than 32 million tons of grain and other foodstuffs across the Black Sea during the war.



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Can the agreement continue to be extended?

Two unnamed U.N. sources said "anything is possible," according to Russia's TASS state news agency.


Russia has threatened to pull out of the deal, which expires on Monday, after Moscow said its demands for improved grain and fertilizer exports had not been met.


On Friday, a U.N. spokesman said Secretary-General Antonio Guterres was waiting for a response from Russian President Vladimir Putin on a proposal to extend the agreement.


A farmer harvests crops in a field around a crater left by a Russian rocket 10 kilometers from the front line on July 4, 2022 in the Dnipropetrovsk region of Ukraine.


Putin told South African President Cyril Ramaphosa in a phone call on Saturday that promises to remove barriers to Russian food and fertilizer exports have not been fulfilled, the Kremlin said.


Russia has repeatedly threatened to pull out of the July 2022 deal brokered by the United Nations and Turkey after Russia's invasion of Ukraine. That deadline was previously extended on May 17 by two months.


Ukrainian officials had no immediate comment on whether the Turkish-flagged ship, the TQ Samsun, had left Odessa.



Why the need for a grain deal?

Ukraine is one of the world's largest exporters of sunflower, corn, wheat and barley.


When Russia invaded in February 2022, its naval vessels blocked Ukraine's ports and intercepted about 20 million tons of grain. This led to a spike in global food prices.


It also threatened the food supply of some Middle Eastern and African countries that rely heavily on Ukrainian grain.


The United Nations has warned that 44 million people in 38 countries are facing "emergency levels of hunger".


According to the Food and Agriculture Organization of the United Nations, world food prices have fallen by about 20 percent since the food deal was signed in July 2022.



Why is Russia threatening to pull out of the food deal?

The deal was originally set to be extended for 120 days at a time, but in March and May 2023, Russia agreed to only 60 days.


Now it is threatening to pull out altogether.


It wants the West to ease sanctions so that its own producers can export more grain and fertilizer.


There are no specific sanctions against Russia's agricultural exports, but Moscow believes that other sanctions prevent international banks, shipping companies and insurance companies from doing business with its producers.


Russia temporarily withdrew from the deal in November 2022, accusing Ukraine of launching "massive" drone attacks on its fleet in Crimea from ships in the Black Sea's secure shipping corridor.



How does the food deal work?

On July 22, 2022, Russia and Ukraine signed the Black Sea Food Initiative - an agreement brokered by the United Nations and Turkey.


It allows for the safe passage of cargo ships through the Black Sea to and from the ports of Odessa, Chernomorsk and South/Pivdeni along a corridor 310 nautical miles long and 3 nautical miles wide.


The first grain shipments begin in early August 2022.



How much grain is exported?

The UN Joint Coordination Centre in charge of the program says that 32 million tons of food and fertilizer have been shipped out of Ukraine since the start of the program.


In June 2023, Ukraine exported less than 1.4 million tons of food. Nine months ago, it was exporting about 4 million tons per month.


This is partly due to reduced production by Ukrainian farmers as a result of ongoing fighting in much of the country.


However, the Ukrainian government says Russia is also delaying cargo ships heading to its ports to load food by preventing them from inspecting for weapons.


"Ukraine accuses it of being too picky with its inspections," said Bridget Diakun of the shipping magazine Lloyd's List. "There are usually about 100 ships lined up at the Black Sea entrance."



Where do Ukraine's grain exports go?

The U.N. says that of all food exported by Ukraine under the food deal:


-47% went to "high-income countries" such as Spain, Italy and the Netherlands.


-26% went to "upper-middle-income countries" such as Turkey and China.


-27% went to "low-income and lower-middle-income countries" such as Egypt, Kenya and Sudan.


Russian President Vladimir Putin has criticized Ukraine for not exporting more to developing countries.


But the U.N. says the food deal benefits people around the world because it brings more food products to the global market, thus lowering global prices.


The U.N. says it has shipped 625,000 tons of food from Ukraine under the food deal for humanitarian aid in Afghanistan, Ethiopia, Kenya, Somalia, Sudan and Yemen.


In 2022, more than half of the wheat grain purchased by the U.N. World Food Program will come from Ukraine.



How have other Eastern European countries been affected?

At the start of the war, the EU lifted trade restrictions on Ukraine's food exports to member states to help the Ukrainian economy. This led to a surplus of food and other food products in neighboring Eastern European countries.


Five of those countries - Hungary, Poland, Slovakia, Romania and Bulgaria - complained that the influx of cheap Ukrainian food was affecting the incomes of their farmers.


The EU has agreed to limit Ukrainian food exports to these countries by September 15th.


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