Russia Abandons Black Sea Grain Deal, Impacting Ukraine’s Food Exports and Global Food Prices

Russia Withdraws From Black Sea Grain Initiative as Ukraine’s Food Exports Are Impacted by Ongoing War

Moscow’s decision to pull out of the Black Sea Grain Initiative, a U.N.-brokered accord that facilitated Ukraine’s grain and oilseed exports, has dealt a blow to Ukraine’s agricultural sector. The agreement allowed Ukraine to continue exporting tens of millions of tons of grains and oilseeds despite the ongoing war. However, Russia, citing “hidden” Western sanctions affecting its own food and fertilizer exports, had effectively strangled the deal before formally ending its participation.

The Black Sea Grain Initiative, established a year ago through U.N. and Turkish mediation, aimed to ensure the safe passage of Ukrainian grain shipments through the Black Sea when Russia invaded Ukraine and blockaded its seaports in February 2022. The agreement established a Joint Coordination Centre that inspected ships and monitored their movements, covering three Ukrainian ports – Odesa, Chernomorsk, and Yuzhny.

Ukraine, known as a major breadbasket and one of the world’s largest exporters of wheat and sunflower oil, suffered a significant drop in food exports following Russia’s invasion. The country used to ship around 5 million metric tons of grains and oilseeds per month through its Black Sea ports. The impact was felt globally, as countries heavily reliant on Ukrainian cereals lost up to two-thirds of their supply, leading to a surge in global food prices. The Black Sea Grain Initiative provided a lifeline, with Ukrainian exports recovering to 4.2 million metric tons by October 2022. In total, around 33 million metric tons have been exported under the agreement, contributing to stabilizing global food prices.

Despite the initiative’s success, Russia decided to withdraw, alleging that the U.N. and Western countries failed to meet its demands for continuing the agreement. Moscow claimed that Western sanctions targeting Russian individuals and the state agriculture bank hindered its own exports, thus violating a separate deal reached in July 2022. The Kremlin had repeatedly threatened to leave unless these sanctions were lifted, but this time, Russia followed through. A proposed compromise by the U.N. and the EU, suggesting the creation of a new unit within the bank for grain trading transactions, was rejected by Moscow.

While Russia’s withdrawal from the Black Sea Grain Initiative is not expected to have the same severe impact as its invasion, the initiative had already slowed down significantly. Shipments had decreased, with only 1.3 million metric tons exported in May, and no new vessels registered since June. Ukraine, however, has been preparing contingency plans to continue its grain exports. This includes utilizing a $500 million guarantee fund to cover expenses incurred by ships in the Black Sea and increasing grain shipments through Europe’s Danube river.

The termination of the Black Sea grain deal comes with consequences. Ukraine’s farmers will face challenges, including the need to sell their products at discounted rates due to increased logistical costs. Analysts predict potential economic difficulties for Ukraine’s agricultural sector. Furthermore, any disruption in global food supplies or market instability affects poor countries grappling with food insecurity. Aid agency Oxfam has urged enhanced support for small farmers in countries heavily reliant on food imports.

Overall, Russia’s withdrawal from the Black Sea Grain Initiative poses challenges for Ukraine’s agricultural sector and highlights the broader implications for global food security. As Ukraine explores alternative routes for its food exports, the international community faces the urgent task of reassessing how to sustainably feed the world while ensuring the stability of vulnerable countries reliant on food imports.