by Marharyta Hlybchenko
- Strategic Significance: The Black Sea Grain Initiative’s suspension underscores the strategic importance of Ukrainian grain exports in the global market. The suspension has caused significant economic implications, not just for Ukraine but for the global market, intensifying inflationary pressures and affecting commodity trade.
- Humanitarian Impact: The halt of grain exports from one of the world’s largest producers has exacerbated the global food crisis, particularly affecting countries dependent on UN food programs.
- Russian Maneuvering: Russia’s involvement in the suspension reveals a calculated use of grain export dynamics to pursue its own interests, influencing global grain prices and leveraging its position in the war.
- Ukrainian Resilience: Despite the suspension, Ukraine’s exploration of alternative routes and temporary solutions showcases its resilience and determination to maintain its role in the global grain market.
- Future Outlook: While the prospects for reviving the original agreement remain uncertain, the search for viable alternatives continues, reflecting the dynamic nature of the current geopolitical landscape.
- Broader Implications: The situation serves as a reminder of the interconnectedness of global systems, where regional conflicts can have wide-reaching impacts on food security and international relations.
From extreme oil prices to the migration crisis, the war in Ukraine caused severe upheavals in numerous areas all over the world. Gradually, the international community finds ways to limit the impact of negative factors on global stability. However, the shifting reality makes it difficult to find more or less lasting solutions. As a result, we witness how once-approved initiatives stumble over circumstances some months later, bringing the issue back to the table. Among such compelling matters is Ukrainian grain export. In June Russia withdrew from the Black Sea Grain Initiative, thus putting an end to the year-old agreement. Since then, consultations have been held to review and appraise options to address the issue. We decided to analyze the work of the initiative to assess the prospects for resuming its work in one way or another.
Footnote: The Grain Market
Let’s take a quick look at the trends of the grain market before and after the beginning of the Russian invasion of Ukraine. Two groups of commodities are usually considered in this regard: grains themselves and fertilizers. Grains play an important role in the food market stability because they are at the center of all price chains. According to the FAO, it is their shortage that caused the greatest levels of acute food insecurity in 2019-2020. Among many aspects that influence pricing in this area, fertilizers play a decisive role. The fact that in many least-developed countries imports of fertilizers prevail over production leads to greater market volatility. The prices of grains and fertilizers have already surged before 2022 as a result of the pandemic effects. The situation has been worsened by the extremes of climate change, as low production levels resulting from floods and droughts have mostly affected the countries experiencing acute food insecurity.
Both Russia and Ukraine are among the top 10 exporters of crops, with Russia being the main exporter of wheat (with a share of around 14% of global exports) and Ukraine being the main exporter of sunflower oil (with a share of around 40% of global exports). Russia is also the biggest exporter of fertilizers, with gas ammonia among the top 5 related export items. Russia is a world leader in ammonia exports, and this gas constitutes an important share of Russia’s agricultural revenues, being the 4th most important fertilizer. The key infrastructure for ammonia transportation is the Togliatti-Odesa pipeline, the world’s longest ammonia pipeline. It stopped working after the start of the war. The launch of war has determined the overall challenges that the world food market will have to face in the coming years. While Ukraine is unable to harvest crops at the pre-war level and maintain stable grain supplies, Russia faces limitations on its exports. To tackle the problems, a mutually acceptable bargain had to be made.
Brief History of the Grain Deal
At the beginning of the war, after heavy shelling of Ukrainian cities, fierce hostilities, and hours of negotiations, the Grain Deal seemed to be one of the first breakthroughs after the 24th of February. The idea was to create a humanitarian maritime corridor “to facilitate the safe navigation for the export of grain and related foodstuffs and fertilizers”, and thus to rein in world food prices. Although the main task — to activate exports — was the same for all parties involved in the negotiations, key divergences in parties’ positions should be noted.
Ukraine. Ukraine was eager to implement the idea, as further obstacles in the grain trade would have destroyed the Ukrainian economy. Before the war, the export of grain was one of the most important sources of foreign currency receipts for the state budget. Given that the share of agriculture in Ukraine’s GDP is the highest among all sectors of the economy (more than 10%), the reduction of grain exports entails precarious implications, as the inability to export crops could lead to a collapse of domestic prices. Russian attacks also had an impact on the readiness of foreign insurance companies to cooperate. To reduce risks, guarantees from Russia had been required. However, certain fears made it difficult to progress negotiations. Kyiv genuinely opposed the demining of its own ports, as it was believed that without sufficient guarantees, Russia could use this exposed flank to attack Ukraine from the sea. Another controversial issue was Russia’s desire to ensure the presence of Russian observers in Ukrainian ports. That could lead to potential espionage and sabotage.
The UN. After the beginning of the war, UN bodies and agencies examined different solutions to mitigate the crisis. However, the key belief shared by Secretary-General António Guterres at that time was to act without forcing the issue. Later, after the conclusion of the agreement, Gueterres would write on Twitter: “The initiative demonstrates the importance of discreet diplomacy in finding multilateral solutions.” The reason behind the delicate approach to that issue was the critical role of the Russian and Ukrainian contributions to UN food security programs. Therefore, one of the priority tasks for the UN since the beginning of the war has become the maintenance of continuous support for humanitarian operations in the most food-insecure countries by both parties.
Turkey. As for Turkey, the establishment of the route posed an opportunity to once again present itself as a separate leading power in the region. For some years Ankara tried to distance itself from the West. The possibility to act as one of the key mediators between Ukraine and Russia could enhance the country’s image and allow maneuvers (e.g., to evade sanctions). That’s why Turkey became a crucial advocate of the agreement. It also explains why Turkey is so desperate to revive the work of the corridor as it was (including Russia as a party to the document).
Russia. It was Russia that Guterres visited first to propose the idea of a humanitarian corridor. Getting Putin’s consent was vital for the agreement to be signed both by Moscow and Kyiv. From the very beginning, Russia stated its favor towards arrangements if certain conditions were met. Russia’s position during the negotiations is discussed in the next section of the article.
In the end, the Grain Deal Initiative was the result of third parties’ efforts. The initiative took the form of two separate agreements (Ukraine/Turkey/UN and Russia/Turkey/UN). The parties refused to view a temporary truce and demining of selected ports as conditions. Instead, the Joint Coordination Centre (comprising representatives of Ukraine, Russia, and Turkey) was established in Istanbul to monitor the cargo routes and conduct inspections.
The concluded deal had some constraints. Due to constant Russian shelling, the range of available ports was limited only to 3 cities of Odesa oblast (Odesa, Chornomorsk, Yuzhne), excluding Ukraine’s second largest seaport — Mykolaiv. Ukraine’s suggestions to add Mykolaiv to the initiative faced reluctance from Russia’s side. Besides, the agreement lacked a mechanism of enforcement and was based on the word of honor (which made the implementation of the treaty essentially dependent on Russia’s decisions). Thus, the agreement was deemed to be provisional. To emphasize its power to breach it at any time, Russia launched an attack on the port infrastructure in Odesa the next day the deal was signed.
The Black Sea Grain Initiative was designed to be mutually advantageous. Although the main focus is usually placed on Ukraine’s benefit, one must not overlook profits, both material and non-material, gained by Russia.
In terms of image, the agreement boosted the positive perception of Russia, especially among developing nations. Initially, Russia interpreted the Black Sea Initiative as a concession on its part, so to say, a gesture of goodwill. Such interpretation gave Moscow an opportunity to make its claims regarding concerns for the welfare of least food-secure states more tangible.
Moreover, the document validity period made it possible to keep Ukraine on, so to say, leash, igniting the instability of Ukrainian grain export. Another gained benefit is the advantage of genuine competition between Russia and Ukraine, typical before the war. Participation in ship inspections gave Moscow an opportunity to slow down Ukraine’s exports while taking free space in the key distant markets with its grain.
Furthermore, on the same day the Grain Initiative was concluded, Russia signed a Memorandum of Understanding with the Secretariat of the United Nations on promoting Russian food products and fertilizers to the world markets. Later Russia would declare the interdependence of documents. The Memorandum was, indeed, connected to the Black Sea initiative by concrete provisions: facilitation of Ukrainian export via ports was one of the listed points. However, the main value of the instrument was the UN’s commitment to facilitate the unimpeded export of food from Russia. Since neither the United States nor the EU have imposed sanctions on Russian agricultural products since February, the UN’s mediation efforts were therefore aimed mainly at the elimination and mitigation of logistical and financial impediments and the resumption of the work of ammonia pipeline “Togliatti – Odesa”.
Almost immediately after initiating the agreement, Moscow launched a campaign to undermine Ukraine’s reputation on the international level. Russia used two remarkable narratives:
- The amount of grain that Ukraine exports is not critical for solving the global food crisis;
- Ukraine has deceived “everybody” (Russia and the poorest states) and commercialized initially humanitarian initiative together with the West.
These points do not reflect reality. According to WFP estimates, Ukraine fed around 400 million people by providing its supplies. In addition, it should be mentioned that the actual export volume for the period 2022-2023 under the Grain Deal Initiative appeared to be lower than projected due to disruptions caused by the Russian military. Russia impeded the work of the corridor (e.g., by slowing down and delaying inspections).
As for the second claim, it is worth mentioning several points. The term “humanitarian maritime corridor” implies a safe nexus and prohibition of direct fire. It doesn’t exclude the passage of neutral merchant vessels. Therefore, the use of this corridor for commercial purposes is not a violation of international law — in fact, even Russians have previously agreed to organize safe passage from Ukraine’s ports for merchant vessels under the mentioned corridor.
That’s why claims regarding the commercialization of the corridor are irrelevant. Likewise, the final destination was not determined as the decisive prerequisite for calling the corridor “humanitarian” when the treaty was designed. Though generally speaking, Ukraine has devoted an adequate share of its exports to the least developed countries. According to the UN data, Ukraine exported 57% of its grain to developing nations, and these figures include 20% of exports to low-income and lower-middle-income countries. Later President Zelenskyi announced a special program “Grain from Ukraine” as a separate humanitarian food program directed specifically at the least secure countries in Africa. The idea behind both narratives is to discredit Ukraine’s efforts and use its damaged image as a favorable background for Russia’s actions and reputation.
On June 1, shortly before the next deadline for the extension of the Black Sea agreement, Russia announced that it would block the ship registration in the Port of Yuzhne until ammonia exports through the Togliatti-Odesa pipeline resume. In a week, on June 7, the same pipeline was destroyed. This incident increased tension between both sides, which accused each other of blowing it up. On the eve of another expiry date, July 17, the new attack on the Crimean Bridge, a symbol of Russian rule on the peninsula, was conducted by the Security Service of Ukraine. On the same date, Russia announced withdrawal from the treaty. Interestingly though, the explosion on the Crimean Bridge was not mentioned as one of the declared reasons. Instead, Russian statements focused on the “full failure” of the UN and West, as Putin characterized it, to fulfill obligations to Russia.
However, despite Russia’s claims that the grain deal didn’t appear to be beneficial for it at all, the figures show the opposite. Unlike Ukraine, whose revenue from agricultural exports decreased by 15%, Russia’s earnings weren’t even stalled. According to the Russian Agriculture Ministry’s Agroexport Center, they increased by 18%. The truth is, from the very beginning Russians perceived the treaty as a hidden instrument of manipulation. The termination of the treaty was regularly used for blackmailing Ukraine and as a way to achieve new stakes during negotiations rather than for a constructive decision based on statistics. This time, new priorities were sounded by Putin right after the termination of the treaty: the resumption of the Togliatti-Odessa ammonia pipeline and the reconnection of Russian banks to SWIFT. The first would increase Russian revenue from diversified selling of fertilizers, the second would possibly undermine EU sanctions.
Already on June 18th, Russia massively attacked Odesa with drones and started a blockade to achieve those concessions. On July 19 the first attack on the port infrastructure of the city took place after a long time.
What’s next? Alternatives
It’s not the first time Russia has terminated a treaty (after all, this mechanism was laid as the foundation), however, it’s the first time that Moscow has terminated this particular agreement not as a bluff. While attempts to revive the treaty continue, alternatives have been sought.
The revival of the Grain Initiative at the expense of revising the points of cooperation between the West and Russia is mainly backed by the UN and Turkey. The UN was even suspected of conducting secret negotiations with Russia. According to BILD, which published allegedly leaked information, the UN suggested reconnecting Russian banks to SWIFT, insuring Russian ships against Ukrainian attacks, defrosting frozen assets, and facilitating access of Russian vessels to EU ports in the context of agricultural trade. Such desperate efforts to renew the treaty can be explained by its importance with respect to UN food programs: in 2023 alone, the Initiative enabled Ukraine to provide wheat to WFP, which accounted for about 80% of WFP’s total wheat supply. However, Ukraine made it clear that it would never agree to leaked terms, while the EU has already denied the possibility of reconnecting Russian banks to SWIFT until the war ends.
Transit routes via Poland and Romania were among the first suggested substitute routes functioning prior to the Black Sea initiative. The operation of the aforementioned passages received high support from the EU: in spring it took the first steps to lift all duties and quotas on Ukrainian agricultural products and devised the Solidarity Lanes Action Plan to develop transport infrastructure. During the first months of the war, these decisions contributed to the mitigation of the domestic economic crisis in Ukraine, as they offered the way from Ukraine to European ports. However, after several months of work, the first dissatisfied European farmers started to voice their concerns. The decision to lift restrictions on Ukrainian exports under the instant zero-duty policy of the EU, accompanied by speculations about cheaper Ukrainian products, led to a short adaptation period of neighboring countries’ markets. The grievance reached its climax when Poland and Hungary imposed unilateral restrictions on Ukraine’s exports, followed by the same move in the name of Slovakia, Bulgaria, and later Romania. To address the issue, the European Commission had to impose “exceptional safeguard measures” on the Ukrainian export of “sensitive products” (wheat, corn, rapeseed, sunflower seeds) to neighboring states. To prevent the piling up of agricultural commodities in those countries, the EU introduced regulations allowing only direct transit via five frontline Member States. To mitigate the crisis, Ukraine has already introduced licensing of its grain exports to five countries and together with Poland and Lithuania agreed to transfer control of agricultural cargo from the Ukrainian-Polish border to a Lithuanian port to reduce the pressure on the Polish transfer capacity.
The detrimental impact of Ukraine’s exports on the economy of neighboring countries seems to become a solid obstacle that will impede the fostering of the work of grain corridors in the future. Since Ukraine strives to increase exports from European ports, the problem of where to store huge amounts of grain remains relevant. Although the EU has already lifted restrictions under certain conditions, Poland, Hungary, and Slovakia have extended the embargo. The situation remains tense as Ukraine puts a complaint to the WTO against those states.
There were a couple of other ideas suggested by regional EU countries, in particular Baltic and Balkan routes. However, logistically those routes are believed to be more costly and less beneficial. Suggested ports have low transit capacity and therefore cannot fully cover the demand.
One of the most promising alternative routes recognized by the US and Ukraine is the so-called Danube route through the ports of Romania. Not only is it the best option for transportation from Ukrainian ports to Romanian ones, but it is also welcomed by Romania. The Danube route has already become the main export lane for Ukraine. However, there are several issues to be solved. First of all, constant Russian shelling of Ukrainian ports makes it harder to export grain via them. This leads not only to the reduction of possible transfers but also to the delay in arrivals and departures. Secondly, transit capacity is still insufficient. In addition, Ukraine’s major Danube ports Izmail and Reni were not involved in significant trade share before the war and therefore are less developed compared to Odesa (e.g., have a lower number of silos). Thirdly, the Danube is a narrow river, so it is not meant for intensive regular trade and harboring large vessels. The aggravating fact is that due to weather extremes, the water level in the Danube is decreasing. Altogether, those facts slow down navigation and limit ships’ capacity to pass through.
Can Ukraine Do It on Its Own?
It’s important to mention that since the termination of the Black Sea agreement Ukraine was determined to continue the work of the grain corridor without Russia. Thus, in consultation with the International Maritime Organization (IMO), the country began devising an alternative corridor in the Black Sea for merchant vessels. The launch of the corridor’s operation was announced in August and despite concerns, there have already been several cases of successful evacuation of ships stuck in Ukraine’s port since February 24. On top of that, the first civilian ships passed through the temporary corridor to the port of Chornomorsk in September. After the above-mentioned cases, some Western countries offered their assistance in ensuring the corridor’s operation. In particular, English Lloyd’s of London insurer has been devising strategies to cover grain ships traveling, while Germany has promised to supply air defense systems to protect the grain corridors. In the same month, Ukraine proposed Turkey and Romania establish a new framework for the corridor’s work without Russia.
However, though the number of ships having passed the new corridor gradually increased (as of October 24, 45 ships have already used this path, with 25 vessels having successfully transported commodities between Ukrainian and foreign ports), this initiative has not yet become commonly upheld due to the unwillingness of foreign vessels to operate without sufficient security guarantees from Russia’s side. Furthermore, due to the unstable security situation, insurance rates remain high. All of the above-mentioned options have one thing in common that makes them uncertain alternatives: they do not include Russia as a guarantor. All attempts of Turkey, the UN and the US to resume the grain initiative initialed in 2022 indicate that they do not want Russia to be isolated. Indeed, they strive to bring it back to the negotiating table.
All in all, the Grain Initiative has lasted for over one year and proved to be effective. It is critical not only for relieving hunger and reducing prices but also for keeping the Ukrainian economy on its toes. Although several proposals offering alternative routes were made, most of them have notable drawbacks compared to the Grain Deal. Ukrainian export appeared to be a complex issue, the nature of solutions to which is significantly influenced by the interests of neighboring states. In general, it seems that in order to raise the confidence of foreign businessmen and states in the safety of humanitarian passages, Moscow’s agreement for the vessels’ passage is highly desirable. That is why the renewal of the existing deal with specified revisions is more preferred than Ukraine’s new proposal.
As for Russia, it will most likely continue to perceive grain shipments as a tool of manipulation. Moscow seeks to undermine trust in Ukraine by manipulating facts and figures, while also putting many spokes in Kyiv’s wheels to weaken it. Putin knows the price of his approval of routes and therefore sees them as an opportunity to get better conditions for the country. Therefore, Russia is unlikely to give up the idea of common passages in the future as losing leverage like this one would be such a waste. Thus, the resumption of the stable working maritime corridor coordinated both by Russia and Ukraine is in demand, and the following developments depend on the countries’ determination to return to this format.
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