Ukraine’s Black Sea deal also helps Russian farmers and economy

With great fanfare, ship after ship laden with grain left Ukraine after being stuck in the country’s Black Sea ports for nearly six months. More quietly, a wartime side deal responded to Moscow’s demands to pave the way for its wheat to reach the world too, boosting an industry vital to Russia’s economy that had been trapped by sanctions wider.

While the United States and its European allies seek to crush Russia’s finances with a network of sanctions for invading Ukraine, they have avoided sanctioning its grain and other goods that feed people around the world. entire.

Russian and Ukrainian wheat, barley, corn and sunflower oil are important to countries in Asia, Africa and the Middle East, where millions of people depend on subsidized bread for their survival. As the war sent food and energy prices skyrocketing, millions of people were pushed into poverty or on the brink of starvation.

Two agreements the UN and Turkey brokered last month to unlock food supplies depend on each other: one protects ships exporting Ukrainian grain through the Black Sea and the other assures Russia that its food and fertilizers will not be subject to sanctions, safeguarding one of the mainstays of its economy and helping to allay the concerns of insurers and banks.

The deal allowed a Western shipper to move two grain ships out of Russia within weeks. Previously, it took months because Western banks refused to transfer payments to Russia. Although US and EU sanctions do not directly target Russian agriculture, Western banks are reluctant to get in the way, impeding buyers’ and shippers’ access to Russian grain.

“You have to invest time with the banks to make them understand all this because the authority says, ‘Go ahead, there is no sanction’, but the banks sanction themselves,” Gaurav said. Srivastava, whose company Harvest Commodities buys, ships and sells. cereals from the Black Sea region.

He called the process with the banks a “labour-intensive exercise”.

What has changed in recent weeks, Srivastava said, is “the appearance…of a sort of truce between all parties.”

The deal was important for Russia because it is the world’s largest wheat exporter, accounting for almost a fifth of global shipments, and the country is expected to experience one of its best harvest seasons this year. Agriculture accounts for about 4% of Russia’s gross domestic product, according to the World Bank.

“What is most important is employment,” said Russian economist Sergey Aleksashenko, referring to jobs created by agriculture. “It’s like 7-8% of employment.”

Agriculture provides 5-6 million jobs in Russia, some regions depend almost entirely on it for their livelihoods, he said.

Srivastava, whose company operates from Los Angeles and Geneva, hopes to be able to ship 10 to 15 million tonnes of Russian grain in the coming year.

He was also able to get out two chartered ships stuck in Ukrainian ports since the start of the war on February 24. He said the company was aiming to recover 1 million tonnes of grain from Ukraine under the four-month-long UN agreement.

“We are a business enterprise, but we are trying to help the plight of farmers in Russia and Ukraine,” Srivastava said. “I’m very optimistic, especially in recent weeks.”

Russia’s demands for the deal included public statements by the US and EU that the sanctions did not target Russian food and fertilizers. He also raised questions regarding financial transactions with the Russian Agricultural Bank, access of Russian-flagged vessels to ports, and exports of ammonia needed for fertilizer production.

A week before Russia signed the deal, the US Treasury Department issued statements containing such assurances. He clarified that Washington had not imposed sanctions on the sale or transport of agricultural products or medicines from Russia.

The Treasury also issued a broad license to authorize certain transactions related to agricultural products, saying that the United States “strongly supports United Nations efforts to bring Ukrainian and Russian grain to world markets and to reduce the impact of the Russia’s unprovoked war against Ukraine over world food”. supplies and prices.

The EU also reiterated that Russian agriculture had not been sanctioned and blamed the global food price spike on the war and the Kremlin’s agricultural export caps intended to protect its domestic market. The 27-nation bloc said its sanctions provided for exceptions, such as allowing EU countries to allow Russian-flagged vessels to trade in agricultural or food products into ports.

Russia says it still faces challenges.

The country’s Ministry of Agriculture says the difficulty in supplying imported agricultural equipment, which is not directly sanctioned, also threatens the grain harvest. He said domestic needs would be met, but exports could be affected.

Even after the deal was signed, Russian Foreign Minister Sergei Lavrov chastised Western assurances that agriculture was exempt from sanctions. During a diplomatic tour of Africa focused on food exports, he said a “half-truth is worse than a lie” while stressing the deterrent effect of sanctions.

UN Secretary-General António Guterres “has pledged to press Western countries to lift these restrictions,” Lavrov said. “We’ll see if he can pull it off.”

Meanwhile, Russian and Ukrainian cereals are increasingly essential to stave off hunger in developing countries. S&P Global Commodity Insights said in a June report that 41 million tonnes of Russian wheat could be available for export this year.

But overall, the world is expected to produce 12.2 million tonnes less wheat and 19 million tonnes less maize for the 2022-2023 harvest compared to the previous year, the executive director of the International Council of Farmers said. cereals, Arnaud Petit. This is partly due to the war in Ukraine and the drought in Europe, he said.

While a strong U.S. dollar and inflation may force some countries to ration food imports, Petit noted that some countries impose export controls that could impact grain availability in sub-Saharan Africa and the Middle. -East.


Raf Casert contributed reporting from Brussels.


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Aya Batrawy, Associated Press


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