Russia stops its participation in the Ukrainian grain deal

Russia said on Monday it was withdrawing from a wartime pact to allow grain exports from Ukraine through the Black Sea until its demands for relief from sanctions on its agricultural exports are met, reversing a deal that helped stabilize global food prices and ease shortages in some parts. from Africa and the Middle East.

agreement, known as Black Sea Grain InitiativeA year ago, with the mediation of the United Nations and Turkey, to alleviate the global food crisis after Russia’s massive invasion of Ukraine. Russia closed Ukrainian ports, stopped ships from carrying grain, and sent global prices to record highs. The deal has been extended three times, most recently in May. The latest extension expired on Monday.

UN Secretary-General Antonio Guterres said he was “deeply disappointed” by Moscow’s decision, and that millions of people facing hunger, as well as consumers facing a cost-of-living crisis, would “pay the price”. He also said he sent proposals last week to Russian President Vladimir Putin to facilitate Moscow’s demands. A UN spokesman said Putin never responded directly.

Russia has repeatedly complained about the agreement, which it described as unilateral in favor of Ukraine. Moscow said Western sanctions, imposed because of Moscow’s devastating war, restricted the sale of Russian agricultural products, and Moscow sought guarantees to liberalize those exports.

In April, the Russian Foreign Ministry also listed other demands for renewing the grain deal: reconnecting the state-owned Agrarian Bank of Russia to the international SWIFT messaging service that is critical to cross-border payments; lifting restrictions on marine insurance and the supply of spare parts used in agricultural machinery; ending sanctions against fertilizer companies and people associated with them; and restore the ammonia pipeline that crosses Ukraine.

Kremlin spokesman Dmitry S. Peskov, who announced on Monday the “cessation” of the Black Sea grain agreement, “as soon as the Russian part is fulfilled, the Russian side will immediately return to the implementation of that deal.”

Russia’s announcement came hours after a deadly attack on the Kerch Strait bridge linking occupied Crimea to mainland Russia. Peskov said the decision to suspend the grain deal had nothing to do with the attack.

Ukraine is one of the world’s leading exporters of wheat, corn, sunflower seeds and vegetable oils. It exported 32.9 million tons of grain and other foodstuffs under the initiative, according to United Nations data. Under the agreement, the ships are allowed passage by the Russian Navy, which has barred other ships from using Ukraine’s ports since the start of the Russian war. Ships are searched off the coast of Istanbul to ensure they are not carrying weapons.

The effects of the pending grain deal soon became apparent. It jolted wheat markets, sent prices swinging, and exposed vulnerable countries in Africa and the Global South to the prospect of a new round of food insecurity.

Chicago wheat futures, a measure of global prices, briefly jumped more than 4 percent as the Kremlin’s move jeopardized a key global market trade route for grain from Ukraine. Later, prices swung to more than 1 percent for the day.

Secretary of State Anthony J. Blinken told reporters at the State Department on Monday: “I hope every country will watch this closely. They will see that Russia is responsible for denying food to people in desperate need around the world.”

John Kirby, a spokesman for the US National Security Council, called Russia’s move “aggressive military action” and said the US was already seeing soaring global wheat, corn and soybean prices.

“We urge the Russian government to immediately reverse its decision,” he added.

said Timothy Ash, chief strategist at BlueBay Asset Management in London and an expert on Russia and Ukraine.

“This will hurt certain countries that depend on these exports,” Mr. Ash said. But beyond that, it “shows how vulnerable Putin is after the Wagner coup: He’s now desperate to get any amount of influence he can.”

Ukrainian President Volodymyr Zelensky said Moscow had breached its agreement with the United Nations and with Turkish President, Recep Tayyip Erdogan, and not with his country, given that Ukraine struck a separate deal with the two middlemen over grain. Mr. Zelensky added, in remarks reported by his press office, that Ukraine is ready to re-ship if the United Nations and Turkey agree.

With Black Sea ports closed again, Ukraine may have to double down on its use of alternative routes, exporting grain by truck, train and river barge — journeys that take longer than shipping by sea and cannot handle the same volume.

Mr. Blinken said the United States would help Ukraine find other means of exporting, but that “it’s really hard to replace what’s been lost now as a result of Russia weaponizing food.”

Mr. Erdogan said he would talk to Mr. Putin about the agreement and expressed hope it could be revived. “Despite today’s statement, I believe that the President of the Russian Federation, my friend Putin, wants this humanitarian bridge to continue,” Mr. Erdogan said in Istanbul.

The deal between Ukraine and Russia — which is also a major global supplier of affordable grain, oil and other food products — is particularly important in the 14 African countries that rely on the two countries for half of their wheat imports, according to Food and Agriculture Organization of the United Nations. Eritrea is completely dependent on them.

When the grain deal began in July 2022, “the noose was tightening, so the deal should help us breathe,” said Celestine Tawamba, CEO of La Pasta, Cameroon’s largest producer of flour and pasta.

The initial agreement allowed Ukraine to resume exporting millions of tons of grain that had been languishing for months. Food prices have fallen by more than 23 percent from their peak in March 2022, according to the Food and Agriculture Organization’s Food Price Index. The agreement allowed the export of vital food products from Ukrainian ports to 45 countries on three continents United nations He said.

But again and again, before each negotiated extension ran out, Russia indicated it might withdraw from the agreement. Last year, after Ukraine was accused of attacking its warships in the Black Sea port of Sevastopol with a swarm of drones, Russia pulled out and stopped participating in inspections that were part of the agreement. Then it came back within days.

The collapse of the grain deal dominated the UN Security Council session on Ukraine on Monday. China, Russia’s ally, did not directly condemn Russia for its withdrawal from the agreement, but called on both sides to resume negotiations to restore the agreement.

Mr. Guterres said earlier that to help meet Russia’s demands, he sent Mr. Putin proposals to “remove obstacles” affecting its financial dealings. He said the UN had proposed enabling a subsidiary of Russia’s Agricultural Bank — one of several institutions Western sanctions have barred from SWIFT because of Russia’s aggression — to restore access to the European Commission, and that the agency had built an on-demand payment mechanism abroad. SWIFT to the bank through JP Morgan.

A UN spokesman, Stephane Dujarric, said Russia’s response to the letter appeared to come in the form of a declaration on Monday. However, Mr. Guterres said the UN intends to begin negotiating a new cereal proposal with Mr. Putin.

Analysts say that despite Russia’s move, some factors may prevent food prices from rising to the staggering levels seen after Russia’s invasion of Ukraine.

For one thing, the global outlook for commodity prices is weaker than it was a year ago due to China’s stalled economic recovery. The global cost of living crisis has eroded demand in general, said Ash, the strategist. Supply chain pressures are also easing, and manufacturing and production costs are falling, according to an analysis by the Oxford Economics research institute.

Russia is still dumping cheap wheat on the global market, “so we’re not running out of wheat right now,” said Arlan Suderman, chief commodity economist at financial services firm StoneX.

“This particular development today may not do much to risk world hunger, but the continued escalation with no solution in sight means the stakes are still increasing,” he said.

Contribute to the preparation of reports Michael DAnd Michael CrowleyAnd Gabriela Sa PessoaAnd Daniel VictorAnd Shafak TimurAnd Cora EngelbrechtAnd Patricia CohenAnd Abdi Latif Daher And Eliane Peltier.