Black sea grain deal: What is it and what went wrong?

In a tumultuous turn of events, the Black Sea grain deal, once hailed as a diplomatic achievement, has crumbled, leaving Ukraine’s vital grain exports and global markets hanging in the balance. Negotiated in July 2022 between Turkey, the UN, and Russia, the deal aimed to facilitate the smooth movement of Ukrainian grain through the Black Sea, ensuring the flow of this essential commodity to the world. However, as tensions escalated and demands clashed, Russia’s abrupt withdrawal has triggered a cascade of repercussions that could reshape Ukraine’s agricultural landscape and disrupt international grain markets.

The Black Sea Grain Deal Unveiled

The Black Sea grain initiative emerged as a collaborative effort to enable Ukraine, known as a breadbasket of the world, to export its grain through its southern ports via the Bosphorus. With alternatives like road or rail through Poland and canal and river routes through Romania falling short, the involvement of Turkey held significance due to its oversight of maritime traffic in the Bosphorus and Dardanelles straits under the Montreux convention.

Promises and Achievements of the Deal

The initiative, a beacon of diplomacy in times of conflict, allowed for the export of commercial food and fertilizers from key Ukrainian ports in the Black Sea. Ukrainian vessels navigated cargo ships through the international waters of the Black Sea, evading mined areas, under the watchful eyes of inspectors from Russia, Turkey, Ukraine, and the UN. This strategic movement stabilized grain prices and fostered a steady global supply. Notably, the World Food Programme swiftly distributed Ukrainian grain to countries like Afghanistan, Ethiopia, Somalia, and Sudan, contributing to price stabilization at $800 per tonne, down from a peak of $1,360.

Fractures Emerge

However, the cracks in the deal began to show as Russia progressively slowed down inspections, impeding the export process. In October 2022, a robust 10 ship inspections per day dwindled to a mere two in May 2023, prompting Russia’s ultimate decision to terminate the agreement. Central to Russia’s discontent was the perceived inadequacy of Western compliance with the deal’s provisions, notably involving Russian agricultural exports and sanctions.

Roots of Discord: Russia’s Demands

Russia’s withdrawal was not solely driven by the derailment of the grain deal. Russia argued that Western sanctions on its goods exports hadn’t been lifted adequately to ensure the safety and legality of its ships transporting food. Demands also extended to lifting sanctions on its key agriculture bank, restoring supplies of agricultural machinery, reopening the Togliatti-Odesa ammonia pipeline, and unblocking assets of Russian companies engaged in food and fertilizer exports.

Blame Game and Consequences

The West accuses Putin of devaluing the deal to prevent Ukrainian economic gains from grain exports. While UN Secretary General António Guterres worked to address Putin’s concerns, exports to the least developed countries faltered. Wheat exports plummeted by 11.8 million tonnes in 2022, equivalent to the annual wheat consumption of 175 million people. Corn and barley exports faced similar declines. High-income countries emerged as major importers, accentuating the disparities in grain distribution.

Uncertain Future: Potential Scenarios

Russia’s defense ministry’s menacing declaration, considering any ship leaving a Ukrainian port a military target, has sent shockwaves through international waters. Turkey, a NATO member, holds the potential to challenge Russia by facilitating grain exports without permission, but this risky step could escalate tensions further. Putin’s ambiguous hints at rejoining the deal, amid the bombing of Odesa port, raise questions about his motives and political support.

According to analytics firm Smartcube, a decrease in exports could lead to burgeoning stockpiles in Ukraine, forcing farmers to scale back sowing in the upcoming season. To fund its military campaign in Ukraine, Russia might raise export taxes on wheat. Furthermore, shortages of fertilizers could intensify as Russia and Belarus collectively account for 14% of global fertilizer production and exports.

Conclusion: A Global Ripple Effect

The demise of the Black Sea grain deal marks a significant setback for Ukraine’s agricultural sector and global food markets. The collapse underscores the intricate web of geopolitical tensions and economic dependencies that shape international trade. As stakeholders grapple with the fallout, the future of Ukraine’s grain exports hangs in the balance, while global markets brace for potential disruptions. Only time will unveil the lasting ramifications of this diplomatic unraveling on the world stage.