Russia halted an unprecedented wartime deal on Monday that allows grain to flow from Ukraine to countries in Africa, the Middle East and Asia, where hunger is a growing threat and high food prices have pushed more people into poverty.
Kremlin spokesperson Dmitry Peskov announced Russia would suspend the Black Sea Grain Initiative until its demands to get its own agricultural shipments to the world are met, even though the country has been shipping record amounts of wheat.
“When the part of the Black Sea deal related to Russia is implemented, Russia will immediately return to the implementation of the deal,” Peskov said. Russia has complained that restrictions on shipping and insurance have hampered its exports of food and fertilizer — also critical to the global food chain.
The accord was brokered last summer by the United Nations and Turkey to allow food to leave the Black Sea region after Russia invaded its neighbour 18 months ago. The deal provided assurances that ships won’t be attacked entering and leaving Ukrainian ports.
Ukrainian President Volodymyr Zelenskyy’s adviser, Mykhailo Podolyak, said the suspension was expected and believes it’s political theatre.
“The statement itself immediately includes an escape clause,” he said. “Therefore, we are dealing with classic public techniques of the Russian Federation that no longer require significant reciprocal reactions.”
Turkish President Recep Tayyip Erdogan said the country’s foreign minister would speak with his Russian counterpart Monday, and that he was hopeful the deal would be extended.
“Despite the statement made today, I believe Russian President [Vladimir] Putin wants the continuation of this humanitarian bridge,” Erdogan said
The suspension of the deal sent wheat prices up about three per cent in Chicago trading, to $6.81 a bushel. Analysts don’t expect more than a temporary bump to food commodity prices because places like Russia and Brazil have ratcheted up wheat and corn exports, but food insecurity worldwide is growing.
Shipments, inspections recently lagging
The warring nations are both major global suppliers of wheat, barley, sunflower oil and other affordable food products that developing nations rely on. While analysts don’t expect more than a temporary bump to food commodity prices because places like Russia and Brazil have ratcheted up wheat and corn exports, food insecurity is growing.
The grain deal provided assurances that ships won’t be attacked entering and leaving Ukrainian ports, while a separate agreement facilitated the movement of Russian food and fertilizer. While Western sanctions do not apply to Moscow’s agricultural shipments, some companies may be wary of doing business with Russia because of the measures.
Ukraine has accused Russia of preventing new ships from joining the work since the end of June, with 29 waiting in the waters off Turkey to join the initiative.
Joint inspections meant to ensure vessels only carry grain and not weapons that could help either side also have slowed considerably. Average daily inspections have steadily dropped from a peak of 11 in October to about 2.3 in June. Ukrainian and U.S. officials have blamed Russia for the slowdowns.
The amount of grain shipped per month fell from a peak of 4.2 million metric tons in October to 1.3 million metric tons in May, the lowest volume since the deal began. Exports expanded in June to a bit over two million metric tons, thanks to larger ships able to carry more cargo.
Asked Monday whether an attack on a bridge connecting Crimea to Russia’s mainland was a factor behind the decision, the Kremlin spokesperson said it was not.
“No, these developments aren’t connected,” Peskov said. “Even before this terror attack President Putin had declared our stand on that.”
Food instability after onset of war
The war in Ukraine sent food commodity prices surging to record highs last year and contributed to a global food crisis also tied to other conflicts, the lingering effects of the COVID-19 pandemic, droughts and other climate factors.
High costs for grain needed for food staples in places like Egypt, Lebanon and Nigeria exacerbated economic challenges and helped push millions more people into poverty or food insecurity.
Prices for global food commodities like wheat and vegetable oil have fallen, but food was already expensive before the war in Ukraine and the relief hasn’t trickled down to kitchen tables.
“The Black Sea deal is absolutely critical for the food security of a number of countries,” and its loss will compound the problems for those facing high debt levels and climate fallout, said Simon Evenett, professor of international trade and economic development at the University of St. Gallen in Switzerland. He noted that rising interest rates meant to target inflation as well as weakening currencies “are making it harder for many developing countries to finance purchases in dollars on the global markets.”
The UN Food and Agriculture Organization said this month that 45 countries need outside food assistance, with high local food prices “a driver of worrying levels of hunger” in those places.
Russia’s wheat shipments hit all-time highs following a large harvest. It exported 45.5 million metric tons in the 2022-2023 trade year, with another record of 47.5 million metric tons expected in 2023-2024, according to U.S. Department of Agriculture estimates.