The Black Sea grain deal is again subject to uncertainties. Russia, Ukraine, Turkey and the United Nations could not reach an agreement on the continuation of Ukrainian grain exports from Black Sea ports which is due to expire on May 18. The shipments from Ukraine under the UN-backed initiative have dropped over the last few weeks due to uncertainty which hampers the ability to plan for shipping companies. But what happens if Russia abandons the grain treaty deal? Find out more in the answers below.
Key Takeaways:
- The Black Sea Grain Initiative was signed separately by Russia and Ukraine in Istanbul with Turkey and the United Nations in July 2022
- The Kremlin has threatened not to extend the grain deal beyond 18 May unless its demands are met
- Under the agreement, Ukraine has been able to export some 29.5 million tons of agricultural products, including 14.9 million tons of corn and 8.1 million tons of wheat
- At the end of April 2023, the EU announced the Ukraine grain deal after import bans by five member countries. The deal “preserves both Ukraine’s export capacity so that it continues to feed the world and the livelihoods of our farmers”
DevelopmentAid: What happens if Russia abandons the UN-backed grain corridor?
“In April 2023, the United Nations World Food Programme (WFP) stated that food insecurity remained at unprecedented levels. If the corridor were to be shut down, it would lead to a jump in global prices of grains when many countries are already facing a steep rise in the cost of imports of food and fuel. The export and transit bans come as the wartime deal to export millions of tonnes of Ukrainian grain via the Black Sea approaches its mid-May expiry with the prospect of an extension uncertain. Ukraine’s ports had been blocked before the agreement was reached in July last year and it is unclear whether it would be possible to ship grain if Russia withdrew. Insurance rates, already high, would be likely to climb and shipowners may be reluctant to allow their vessels to enter a war zone without Russia’s agreement. Among the risks for insurers would be the presence of Russian navy ships in Black Sea waters and floating sea mines. The collapse of the deal combined with the bans would trap millions of tonnes of grain inside Ukraine which could trigger a large reduction in the planting area and future harvests with the concomitant closure of farms and processing plants.”
“If Russia abandons the UN-backed grain corridor this will accelerate the long-term effects. Buyers are already looking for alternative sources for fertilizer and grain. This may boost Russian exports. This will hasten long-term changes in Ukraine economy with less emphasis on primary exports and the faster growth of a modern IT and service-based economy, especially if Russia retains some agricultural and traditional industry-based territory. Ukraine will look more like a modernizing Eastern flank economy of the EU.”
DevelopmentAid: Please comment on the previous decision of the five EU member-states to ban the imports of Ukrainian grain
“Ukraine has been exporting considerable volumes of grain through neighbouring eastern EU countries since the beginning of the conflict. This is causing unrest among farmers in the region who say it has undercut local supplies and the grain is purchased by feed mills, leaving farmers without a market for their crops. Hungary’s agriculture minister is reported to have said that low production costs in Ukraine, due to practices that are not permitted in EU countries, has allowed Ukraine to export large quantities of poultry, eggs, and honey to the European market, driving costs down to unsustainable levels making it difficult for Hungarian farmers to remain competitive. The EU has reached an agreement banning the import of Ukrainian grain to Poland, Slovakia, Hungary, Romania, and Bulgaria which will remain in place until June 5. In return for the temporary blockade, Bulgaria, Hungary, Poland, and Slovakia agreed to lift their unilateral bans on wheat, maize, rapeseed, and sunflower seed coming from Ukraine which had prevented grains being transported through their countries. The five countries will get €100 million from the EU to compensate those farmers impacted by cheap imports. Last month Brussels dropped tariffs and quotas on the Ukrainian food trade to protect Kyiv’s position as one of the world’s agricultural powerhouses, as well as to counter fears the war could cause global food shortages.”
“It is normal that some EU countries want protectionist measures to protect their farmers but they can still help Ukraine by allowing the transit and re-export of grains and fertilizers. This shift will help to permanently alter the transport pattern for goods and accelerate Ukraine’s integration into the EU economy.”
DevelopmentAid: Has the corridor alleviated the food crisis?
“Before the war, the United Nations World Food Programme (WFP) purchased half of its grain supply from Ukraine. Reduced grain shipments from Ukraine have played a role in the global food price crisis exacerbated by other factors such as climate extremes and the COVID-19 pandemic. On 22 July 2022, an agreement was brokered by the United Nations and Turkey to open a safe wartime shipping humanitarian corridor in the Black Sea known as the Black Sea Grain Initiative. Since March 2023, over 23 million tonnes of grain and other foodstuffs have been exported via the Black Sea Grain Initiative. Almost 49% of the cargo was maize, the grain most affected by blockages in Ukrainian granaries at the beginning of the war (75% of the 20 million tonnes of grain stored). It had to be moved quickly to make space for wheat from the summer harvest. The leading destinations have been China (6.3 million tonnes), Spain (4.8 million), and Turkey (3 million). However, while unblocking the sea export route has helped to address the global food security crisis and lower grain prices, the export backlogs remain significant, and the United Nations World Food Programme has said that food insecurity remains at unprecedented levels.”
“Yes, but the Corridor has only helped to temporarily stabilize about a quarter of the exports of grain and fertilizer for Ukraine (45 million tons of products) and the proportion of output dedicated to emergency food aid for the World Food Programme has been quite small (only 2 or 3% of corridor shipments). The world market is robust and flexible and this corridor closure will accelerate healthy trends for developing countries to produce more food for themselves and accelerate South-South trade. Temporarily, the corridor has helped to alleviate the world food crisis but the real solution is more food production in developing countries.”
See also: Will the Black Sea grain corridor solve the global food crisis? | Experts’ Opinions
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