Russia is back in the Black Sea Grain Export Agreement. It stopped being a member for four days after Ukrainian ships allegedly attacked Russian ships in the Black Sea. This immediately eased the pressure on food prices and eased worries about a new food shortage around the world.
The United Nations, a big backer of the deal to let Ukraine export grain, says that Moscow wants to change the parts of the agreement that help Russian food and fertilizer exports. Officials in Russia want more to be done to make sure that the country can continue to export its huge amounts of food and fertilizer despite sanctions from the West.
Sanctions put in place by the United States, the European Union, and others do not have a direct effect on Russia’s agricultural exports. However, restrictions in the country’s financial, logistics, and insurance sectors do make it harder for Russia to sell its goods.
A 120-day initiative was approved in July. The export contract ends on November 19.
Due to the unclear situation, grain markets have been volatile all week and wheat prices have fallen significantly.
Author’s Comment:
Since the beginning of Russia’s invasion of Ukraine, Russia had executed an undeclared but de-facto blockade by “mistakenly” shelling merchant vessels sailing from Ukrainian ports. Russia’s rationale for the blockade was to cut off Ukraine’s sea trade routes, through which almost 90 percent of the country’s trade flows, and thus cripple Ukraine economically. Although the Russian blockade served well to its purpose until then, Russia had to accept the grain deal last July allowing some Ukrainian ports to resume trade through the Black Sea. The reason of Russia to accept the deal in spite of breaking its own blockade was to ease sanctions “indirectly” affecting Russian grain and fertilizer exports. Russia couldn’t reach its goal of reducing its losses on agricultural exports to the level it wanted until the end of October. Now it could be trying to make conditions better for its own by threatening to suspend the deal completely against Ukraine.
