By John Helmer, Moscow
@bears_with
Officially speaking, the Russians ended the year-long Black Sea Grain Initiative by refusing to renew it on July 17.
Practically, it has been doomed for weeks. The Ukrainian attacks on the Togliatti-Odessa ammonia pipeline (June 8) and the Taman ship-loading terminal (June 2); Ukrainian efforts to use the grain carriers in the United Nations-supervised sea corridor to conceal imports of weapons and the launch of naval drones aimed at the Crimean Bridge, Russian Black Sea fleet vessels, and other shore targets; the refusal of the NATO states to lift their sanctions against the Russian trade to implement the terms of the original UN agreement — at the same time as they are stopping Ukrainian exports from entering the European Union (EU) at dumping prices – this is what killed the deal.
That it had benefitted the Ukraine and the EU states more than it benefited Russia has not been an obstacle to Russian renewal of the terms until now, but too embarrassing for the EU states to admit, and their media to report.
President Vladimir Zelensky’s spokesman said the Russians are now attempting “to destroy the ability to supply food to the countries of the global south”. This line of Russia at war with the world was picked up by Josep Borrell, the EU’s foreign minister: “If this grain is not only stopped but [also] destroyed . . . this is going to create a huge food crisis in the world…The ministers will have to discuss how to proceed, but there is only one solution: to increase the military support to Ukraine. If they are being bombed, we have to provide anti-aerial capacities.” “Hundreds of thousands of people, not to say millions, urgently need the grain from Ukraine,” echoed the German Foreign Minister, Annalena Baerbock, “which is why we are working with all our international partners so that the grain in Ukraine does not rot in silos in the next few weeks, but reaches the people of the world who urgently need it.”
The UN Secretary-General Antonio Guterres repeated that Russia’s war in the Ukraine was a war against food supplies, low wheat prices, and survival from starvation worldwide. “Today’s decision by the Russian Federation will strike a blow to people in need everywhere.” “Struggling people everywhere and developing countries don’t have a choice. Hundreds of millions of people face hunger and consumers are confronting a global cost-of-living crisis. They will pay the price.”
White House officials claimed the Russians are weaponizing food. “Russia’s decision to resume its effective blockade of Ukrainian ports and prevent this grain from getting to markets will harm people all over the world,” National Security Council spokesperson John Kirby said at a White House briefing.
These claims aren’t true. They are “clashes with shippers’ reality”, a Bloomberg report acknowledged. Like almost every scheme the corruptly clever Zelensky (lead image, left) and the corruptly stupid Joseph Biden (right) have devised in the current war, the conversion of the fight for Odessa and Ukraine’s other Black Sea ports into a war to starve the hungriest peoples of the world is failing.
Instead, the battle for Odessa has begun where the electric war to turn off the city’s lights left off. The end of the Black Sea grain initiative will profit the Russian grain and fertilizer exporters by a big margin, compared to the past year; the neediest country importers will gain from direct Russian shipments at low to zero price; and the Ukraine will lose, not only its remaining ports and their trading and shipping infrastructure, but also its sea lanes southward.
At the same time, Ukraine’s neighbours in the European Union (EU) are closing the river lanes, roads, and rail lines to Ukrainian grain exports northward and westward. That’s weaponizing food – but the Europeans are doing it to protect their own farmers.
The Russian naval blockade was officially announced by the Russian Defense Ministry on July 19.
“Due to the termination of the operation of the Black Sea Initiative and the curtailment of the maritime humanitarian corridor, from 00.00 Moscow time on July 20, 2023, all vessels traveling in the Black Sea to Ukrainian ports will be considered as potential carriers of military cargo. Accordingly, the flag countries of such vessels will be considered involved in the Ukrainian conflict on the side of the Kiev regime. In addition, a number of marine areas in the north-western and south-eastern parts of the international waters of the Black Sea have been declared temporarily dangerous for navigation. Relevant information warnings about the withdrawal of safety guarantees to seafarers have been issued in accordance with the established procedure.”
The corridor created by the Istanbul agreements of July 2022 was 320 nautical miles long connecting Ukraine’s ports of Odessa, Chernomorsk and Pivdennyi/Yuzhny with an inspection area inside Turkish territorial waters. While transiting the maritime humanitarian corridor, the UN centre coordinating the operation said, “no military ship, aircraft or unmanned aerial vehicle may approach within a radius of 10 nautical miles of any vessel engaged in the Initiative and transiting the corridor.” Source: https://www.dailysabah.com/
Zelensky replied, claiming he has asked for UN and Turkish support to run the gauntlet against the blockade. “The Black Sea Grain Initiative can and should continue to work – if not with Russia, then without Russia. The grain export agreement – an agreement with Turkey and the UN [sic] – remains in force. I have sent official letters to the President of Turkey and the UN Secretary General with a proposal to extend the work of the Black Sea Grain Initiative or its equivalent in a trilateral format – that way it is most reliable. Ukraine, the UN and Turkey can jointly ensure the operation of the food corridor and the inspection of ships.”
The western insurers, who have been imposing US and EU sanctions to stop Russian grain and fertilizer shipments for the past year, have now imposed a stop for cover of Ukrainian cargoes. ““No sane owners will call there uninsured,” Bloomberg quoted the Greece-based Doric Shipbrokers SA, which has been sending vessels through the UN sea lane for the year of the grain agreement. Without the protection of the safe corridor “the Ukraine trade is dead.” “I don’t think shipowners will go to the Ukrainian ports until the corridors are reestablished — it’s not safe to do so,” another Bloomberg shipping source announced.
In the Russian assessment Turkey’s President Recep Tayyip Erdogan will not risk his navy to escort Ukrainian grain vessels. “Especially if we recall that in 2022-23, Turkey was the leader among other importers of Russian food by a large margin. 12.6 million tonnes, of which 11.3 million are cereals. For comparison: only 3.2 million tons of food shipments left Ukraine for Turkey during the period of the deal.”
According to the UN data tabulation for the Black Sea Grain Initiative, Turkey’s 3.2 million tonnes was the third largest beneficiary of the year-long shipping deal. China, with 8 million tonnes, came first; Spain second with 6 million tonnes. Italy and the Netherlands followed with 2 million tonnes each. The UN also reports that 80% of the shipments from the Ukraine went to the EU states, Israel, Japan and other high-income countries.
In other words, this has been a UN programme for lowering grain prices to feed the rich states in the alliance against Russia. Guterres and his associates at the UN have been dissimulating this from start to finish.
Click on source to enlarge: https://www.un.org/
World Food Programme (WFP) shipments of 725,000 tonnes represent the share of the Ukrainian grain exports which went to the neediest countries – just 2.2% of the total. The list of these WFP countries, and the volumes of grain they received, can be found at the same UN source.
Over the past year commercial costs and logistic factors have independently restricted the Ukraine from exporting more grain on land routes, truck and rail. No more than 15% of the country’s total exports went that way. But even that limited volume has triggered Polish and other bans. The reaction of the Polish government to the termination of the UN sea corridor has been to reemphasize that Poland’s priority is to protect itself from the Ukraine. “The war in Ukraine is having an increasingly serious impact on the agricultural market,” Prime Minister
Mateusz Morawiecki said on Wednesday. “This is having a negative impact on Poles, which is why we have imposed an embargo on goods from Ukraine. In a couple of months, the EU intends to reopen the borders for the import of grain from Ukraine. We do not agree to this, we will not open the borders, and we will not allow the destabilization of our economy. We are obliged to protect Polish interests and our agriculture.”
Poland, along with Hungary, Slovakia, Bulgaria and Romania negotiated a side deal with the EU in May, according to which they would lift their ban on the Ukrainian exports in exchange for €100 million in EU funding and assurances that Ukrainian shipments would only pass through the five countries on their way to other destinations.”
The new Russian military campaign, combining blockade at sea with targeted destruction of port infrastructure is aimed at landlocking the Kiev regime. Zelensky “can at least beg an aircraft carrier group from Biden to escort grain carriers and drag her into the Black Sea, spitting on the Montreux Convention,” commented Nikolai Storozhenko in Vzglyad. “But what’s the use of it if the ports can’t ship?”
In the analysis to follow, Vzglyad reporter Olga Samofalova explains what the impact will be on the Russian grain and fertilizer trades. The translation into English is verbatim; illustrations have been added.
Source: https://vz.ru/
July 18, 2023
How the cancellation of the grain deal will help Russian exporters
Cancellation of grain deal will make life easier for Russian exporters
Text: Olga Samofalova
There will be no more grain deal. Russia has puts an end to this issue. However, this is not such sad news for Russian grain exports and budget revenues. Moreover, this deal initially brought Russia only damage, according to the Russian Grain Union. Will the rejection of the grain deal turn out to be even more beneficial to our exporters?
The Russian side no longer intends to conduct any negotiations on the resumption of the grain deal. The decision to terminate cooperation in this format is final, said Dmitry Polyansky, First Deputy Permanent Representative of the Russian Federation to the UN. Earlier, the Russian Foreign Ministry announced the termination of the grain deal and notified Turkey, Ukraine and the UN about it.
Russia agreed to this, because during the year of the deal’s existence and its extension three times, the terms of the deal were not fulfilled. None of the five system tasks stipulated by the memorandum with the UN has been completed. Formally, Russian exports of food and fertilizers are not subject to Western sanctions, but difficulties arise due to general restrictions on payments, logistics and cargo insurance.
In response to the grain deal, Russia was waiting for the easing of these restrictions on Russian grain and fertilizer exports. In particular, it was assumed that the Rosselkhozbank [Russian Agricultural Bank] would be connected to the SWIFT system again, which would facilitate financial transactions with customers. Supplies of spare parts for agricultural machinery, as well as logistics and transportation insurance were also to resume. The issue of ammonia supplies via the Togliatti–Odessa ammonia pipeline was supposed to be resolved, but now this issue is off the agenda, since the pipe was recently blown up.
The problem is that Western countries do not consider the Russia–UN memorandum an integral part of the grain deal, although they have recently started talking about possible concessions, for example, about reconnecting a subsidiary of the Rosselkhozbank to SWIFT.
Source: https://news.un.org/
At first glance, it may seem that this could seriously affect the export of Russian grain and fertilizers. After all, during the UN programme, an export record was set. Last agricultural year, from July 2022 to June 2023, Russia exported a record 60 million tonnes of grain, of which 47 million tonnes was wheat. Whereas a year earlier, in the 2021-2022 agricultural year, Russia exported only 38.1 million tonnes of grain. Export revenue in 2022 amounted to $41 billion, according to the Ministry of Agriculture.
However,by itself the cancellation of the grain deal does not cause any harm. The reason is simple — nothing changes for Russian goods at all, since no concessions were made during the grain programme. Throughout the year when the deal was in effect, all the restrictions on finance, logistics and insurance for our companies were in effect. Russian exporters had to work with these restrictions and look for ways to circumvent them, living in the expectation that something was about to change and the restrictions would be lifted. But everything remained in the same place, so whether there is a deal or no deal – this makes no difference to them. Thus, Russia achieved record grain exports over the past year not because this grain deal was in effect (its influence is deceptive), but thanks to a high harvest and the rapid adjustment of companies to new working conditions with restrictions.
Buyers of our grain will continue to receive wheat as before, even after the cancellation of the grain transaction scheme. All contractual obligations will be fulfilled, the fight against world hunger will continue, the Union of Grain Exporters said.
“For Russia, the closing of the deal itself will not lead to negative consequences, since it initially brought Russia only damage”, said Arkady Zlochevsky [right], president of the Russian Grain Union. According to the expert, such a deal should not have been concluded from the very beginning. According to the Russian Grain Union, during the year of the grain deal, the Russian grain industry alone lost more than $1 billion, not counting the loss of the fertilizer companies.
Earlier, in an interview with RIA Novosti, Zlochevsky said that because of the grain deal, a price discount was formed on the supply of Russian wheat in relation to the prices of international competitors: the difference was from $10 to $20 per tonne of wheat, and at peaks it reached $79 per tonne. The closing of the grain deal will allow the prices of Russian grain to return to fair levels, although this may not happen immediately, Zlochevsky believes.
The grain deal, on top of everything else, brought down world food prices. “Even a superficial analysis suggests that the beginning of hostilities in Ukraine gave rise to a significant price rally of food on the world market. In March 2022, the FAO (Food and Agriculture Association of the United Nations) composite price index rose to 160 points, and for grain and vegetable oils it turned out to be about 170 and 210 points, respectively. However, after the launch of the grain transaction, the price level began to decline, and in June 2023, the average value of the FAO grain price index was 126.6 points,” says Maxim Maximov, Associate Professor of the Department of Corporate Governance and Innovation at the Plekhanov Russian University of Economics.
In Maximov’s opinion, if there had been no grain deal, then Russia could probably have received comparable revenues from the sale of a smaller volume of exports at higher prices (while maintaining the trend of rising food prices).
Accordingly, the final cancellation of the deal may raise food prices. On Monday, world grain prices began to rise on the Russian termination news. However, Maximov is in no hurry to say that this is a stable and steady trend for price growth. “FAO forecasts say that world grain stocks will show an increase of more than 2% by the end of the 2023-2024 season. At the same time, the price level and the amount of grain on the world market in general will depend on how supplies from Ukraine will be carried out after Russia withdraws from the grain deal,” Maximov says.
THE MOVEMENT OF WHEAT PRICE FUTURES, CHICAGO EXCHANGE
Past five years
Past month
Past week
Source: https://www.google.com
During the grain deal, the Ukraine was able to export about 33 million tonnes of grain by sea. The withdrawal of such a large volume of grain from the world market, of course, cannot but affect prices. However, it is unlikely there will be such losses. Now the options for sending Ukrainian grain by sea will be limited, but the Ukrainians can continue to send ships through their waters at their own risk. In addition, Ukraine has other ways of sending grain – by rail and by road. This, of course, is unlikely to appeal to Poland and other EU agricultural countries, since Ukrainian grain settling in Europe greatly knocks down prices there and ruins European farmers. However, the EU will have to solve this problem on its own.
Maximov believes that in the medium term, the price of grain will still rise, and this opens up a certain window of opportunity for our exporters to increase export revenue.
Finally, the understanding that the grain deal is in the past can help by itself. This awareness will allow Russian companies not to hope for the lifting of restrictions and more actively build workarounds for the trade with the understanding that the sanctions situation will last for a long time.
“The termination of the grain deal makes it possible to carry out the necessary restructuring of logistics routes and use the North–South route with maximum load with access to Asian and African markets through Iran. The development of this direction seems to be key for the level of food exports from Russia. This scenario will not only preserve the level of export earnings, but also supply grain, food and fertilizers to the poorest countries of the world. That is, to realize the same goals that were laid in the foundation of the grain deal, but were shamelessly ignored by our former partners”, says Maximov.
Source: https://en.wikipedia.org
As for the export of Russian mineral fertilizers, this has decreased by about 15% due to the general sanctions restrictions. However, in 2023 Russia is gradually restoring fertilizer exports, and this year it may reach supply levels comparable to the record figures of 2021 of almost 38 million tonnes, Andrei Guriev, head of the Russian Association of Fertilizer Producers (RAPU) said in May. And again, it’s not just been the grain deal, but the fact that fertilizer producers needed more effort and time to change buyers from unfriendly to friendly, to agree on payment, logistics and insurance. There was a tougher situation with delivery restrictions, for example, via the ammonia pipeline. More tangible progress in these matters is expected this year, hence such high export expectations.
That is, in general, the cancellation of the grain deal may be beneficial for Russian exporters and the budget. However, negative consequences are also possible, which go more into geopolitics. And it’s not that poor countries will not be able to get Ukrainian grain. Of the 33 million tonnes of grain that Ukraine exported through the Black Sea ports during the year of the deal, only less than 3% were exported to the poorest countries, according to the Foreign Ministry. The fight against hunger on the part of Ukraine is used, rather, as a red flag and for making the deal more important than it was.
However, it is important for Russia to maintain friendly relations with Turkey, China and other friendly countries. And theymay not be exactly thrilled at the rise in world grain prices. This generally adds to their problems and adds to internal inflation. So, our partners also buy Ukrainian grains; for example, China is 30% dependent on corn imports from Ukraine.
Therefore, Russia’s decision to suspend participation in the grain deal may be revised as a result of negotiations, though for this to happen there must be the possibility to achieve at least part of the requirements that would facilitate the export of grain and fertilizers for Russian business – this outcome is not ruled out by Olga Belenkaya, head of the Macroeconomic Analysis Department of the Moscow brokerage, Finam.
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