Russia unilaterally withdrew from the grain deal on July 17. Following this decision, the Russian Defence Ministry stated, “In connection with the termination of the Black Sea Initiative and the end of the maritime humanitarian corridor…all ships proceeding to Ukrainian ports in Black Sea waters will be considered as potential carriers of military cargo.” After this statement, Russian representatives at the Joint Coordination Centre (JCC) in Istanbul left the city. These developments mean the suspension of Ukrainian grain cargoes from the Black Sea and a dim picture for the future of food markets, along with Russia’s decisiveness.
In 2022, Turkish President Recep Tayyip Erdogan played a key role in mediating the deal between Ukraine and Russia to open the grain corridor. As sea mines and warships threatened safe navigation, leaving the Black Sea ports was impossible until the parties struck the deal. Thus, the deal was a breakthrough in the Russia-Ukraine conflict, as it designated a safe passage for the vessels. Moreover, the parties finally agreed on a positive agenda after the start of the Russian Special Operation in February.
In July 2022, it was agreed that the deal would remain in effect for 120 days and it functioned properly, with extensions, for a year. According to UN data, 33 million tons of grain reached different destinations worldwide. However, while the vessel traffic from Ukraine was maintained, there was almost no improvement in the promises issued to Russia. According to the Memorandum of Understanding signed between Russia and the Secretariat of the UN, Russia was expecting facilitated access to foreign markets in exporting its food products and fertilizers. Due to the sanctions imposed on Russia by the West, Russia faced problems that impeded its exports, as there was hardly any evidence of advance in the banking sector, insurance, and logistics spheres. Despite all these predicaments, Russian grain exports soared to a record 60 million tons during the agricultural season of 2022-2023. This achievement, however, doesn’t imply unrestricted access to Western ports or normalised payment and insurance processes. In the meantime, Ukraine continued to diversify its export routes via Romania and Poland, along with the Black Sea.
As the problems prevailed, Russia started complaining about the unresolved issues and reminded that only a small percentage of the grain was reaching underdeveloped countries. Speaking at Vladivostok Economic Forum in September 2022, President Vladimir Putin said, “If we exclude Turkey as an intermediary country, then almost all the grain exported from Ukraine is sent not to the poorest developing countries, but to European Union countries.” Looking at the performance of the grain corridor, President Putin’s statement has proven to be correct. A year later, UN data shows that the top five receivers of the Ukrainian deal are China, Spain, Turkey, Italy, and the Netherlands. Only 3 percent of the grain was exported to low-income countries, and 44 percent of the recipients were higher-income states.
The data indicates that developed countries directly benefited from the deal. However, the agreement also indirectly favoured underdeveloped nations, as wheat prices have dropped 14 percent and corn prices have declined by over 20 percent since January 2023. Post-agreement, prices began to rise. If the deal is not reinstated, prices are projected to climb further in the upcoming quarter, especially after the harvest season concludes in the northern hemisphere, posing challenges for underdeveloped countries. At the African summit in St. Petersburg, Egyptian President Abdel Fattah al-Sisi advocated for the deal’s revival. In response, President Vladimir Putin committed to supplying Burkina Faso, Zimbabwe, Mali, Somalia, the Central African Republic, and Eritrea with 25-50,000 tons of complimentary grain each over the next three to four months. While Russia’s gesture will provide relief for these nations, more needs to be done to sufficiently address the global supply issues that keep food prices elevated. It’s worth noting that Ukrainian exports constitute nearly 8 percent of global exports.
What does Russia want?
On July 19, addressing members of the government, Russian President Vladimir Putin listed Russia’s demands to resume the grain deal as:
- Lifting the sanctions on Russian grain and fertilizers
- Reconnection of the Russian financial institutions to the SWIFT system to alleviate the obstacles before exporting grain and fertilizers
- Resuming the supply of spare parts for agricultural machinery and the fertilizer industry in Russia
- Resolving issues related to ship chartering and the insurance of Russian food export deliveries
- Resuming the operation of the Togliatti-Odessa ammonia pipeline
- Releasing the Russian assets associated with the agricultural sector
From the list above, it is evident that the conditions largely resonate with the MoU inked in July 2022, yet there is more that Russia asks. First, the Kremlin seeks tangible actions before reinstating the grain deal. Specifically, there’s a call for integrating the Russian agricultural bank, Rosselkhozbank, into the SWIFT system instead of entertaining alternative propositions. In recent months, JP Morgan served as a facilitator for Russian grain exports but has since ceased processing their payments. Consequently, the Kremlin desires unrestricted access to the global financial system rather than relying on a singular Western bank. Second, Russia is pushing for relaxing sanctions on its fertilizer and agricultural production to ensure continued robustness in these domains. Nevertheless, such requests might be met with scepticism, given the potential dual-purpose application of some of these resources.
The above list is a reflection of easing some financial constraints. Still, Russia is also uncomfortable with Ukraine’s ongoing sabotage attempts, including the drone attack on the Kerch Bridge on July 17. The decision to withdraw was taken just after this attack, and Russia ostensibly aimed to weaken Ukraine’s power. The Kremlin argues that the ongoing traffic helps Ukraine access financial sources and gain leverage on the battlefield by providing necessary sources. So, it is no surprise that following the suspension of the grain deal, Odessa was hit by missiles that would undermine Ukrainian exports via European routes.
Can Ankara convince the Kremlin to resume the deal?
Talking to President Putin on August 3, President Erdogan underlined the importance of the grain deal, which he calls “the peace bridge.” Following the phone call, the Turkish President said he looks forward to meeting with President Putin in August. Ankara remains one of the few influential actors that have a dialogue with both Kiev and Moscow. Turkey not only brokered the deal but also benefited by receiving grain shipments safely due to its strategic location near Ukrainian and Russian ports. Thus, the reinstatement of this deal would bolster Turkey’s global reputation and further its economic interests.
However, the Turkish government’s recent manoeuvres after the elections disappointed the Kremlin. Following the meeting between President Erdogan and his counterpart Volodymyr Zelensky, Azov commanders were allowed to return to Ukraine. They were supposed to remain in Turkey, according to a September deal on the exchange of prisoners of war between Russia and Ukraine. Without official comments, it is hard to come up with certain conclusions regarding this development. Still, Ankara probably aimed to de-escalate the tension within the ranks of NATO prior to the Vilnius summit as an actor facing harsh criticisms due to its close dialogue with Moscow. Similarly, President Erdogan removed the blockade before Sweden’s membership in NATO and supported Ukraine’s accession to the alliance even though the problems of the country’s territorial integrity remain unresolved.
Its economic challenges and recent endeavours to normalise its foreign policy have instigated these changes. Present signals from the Kremlin suggest that Turkey’s recent actions are noted but will not lead to a dramatic fracture in bilateral ties. However, gauging the repercussions of Turkey’s ambition to mediate between Ukraine and Russia remains complex.
With the grain deal in limbo, Turkey will undoubtedly face heightened pressure from the West and NATO to ease its blockade on the Turkish Straits. On February 28, adhering to the Montreux Convention, Ankara restricted access to the Black Sea for any third-party warships. Recently, some analysts have proposed alternatives, such as having NATO forces escort vessels transporting Ukrainian grain and fertilizers for humanitarian reasons. While such an action could lead to further regional tensions, making it an unlikely scenario, it also indicates a potential push for Turkey to permit access to the Black Sea for the 21-day period stipulated in the Montreux Convention.
Conclusion
The situation underscores that Russia’s decision to pull out of the grain deal extends beyond mere financial considerations. Although current sanctions have constrained Russia’s export agility, their impact remains limited. However, the Kremlin contends that the agreement primarily serves Ukraine’s interests, with commitments made to Moscow being sidelined. Within this context, Moscow’s demands were consistent with the July 2022 framework. Post-withdrawal, Russia has tactically targeted specific infrastructures, impeding Ukraine’s grain export capabilities. While these actions can be interpreted as retaliatory measures against alleged sabotage by Ukrainian forces, they undeniably strain Kiev’s financial capacity to sustain its military endeavours.
The prevailing narrative from Russia indicates a preference for tangible actions over suggested alternatives as a condition for re-engaging in the grain deal. In this equation, Turkey and the UN Secretary-General emerge as potential mediators to persuade Russia. However, such diplomacy must be part of a broader, collaborative initiative, urging Western stakeholders to move beyond mere assurances. A prolonged impasse risks reverberations not only within the global food market but also within the geopolitical dynamics of the Black Sea in the foreseeable future.
Valdai Discussion Club
