Explained | Russia formally backs out of Black Sea grain deal. What happens now?

Moscow, Russia

Russia, on Monday (July 17), formally notified Ukraine that it will suspend its participation in the Black Sea grain deal, hours before its previous extension expired. The safe passage through which Kyiv was able to ship grain via the Black Sea despite being in the midst of a war with Moscow to the parts of the world struggling with hunger will now be suspended which may affect global food security. 

What was the deal about?

Turkey and the United Nations managed to broker a landmark deal between Russia and Ukraine in July last year, months after Moscow invaded Kyiv on February 24. 

The aim of the pact was to alleviate a global food crisis, exacerbated by the Russia-Ukraine war, and allow a safe passage for Ukrainian ships carrying grain to be exported through the Black Sea corridor. 

Notably, Ukraine is one of the world’s biggest exporters of food grains, such as wheat and corn, and played a significant role in the UN’s food aid programmes. Therefore, when Russia invaded and blocked Ukrainian ports, prices of food grains soared across parts of the world. 

The UN-brokered deal allowed cargo ships from three Ukrainian ports of Odesa, Chornomorsk and Pivdennyi (Yuzhny) to pass through the 310 nautical miles long and three nautical miles wide Black Sea safe passage after being inspected for weapons. 

Nearly 33 million metric tonnes of corn, wheat and other grains have been exported by Ukraine under the agreement, reported Reuters, which has been extended twice since it was first signed. Kyiv has also contributed 725,200 (2.2 per cent) tonnes to the UN World Food Programme (WFP).

While the Black Sea deal assured that no ships would be attacked entering and leaving the Ukrainian port, a separate agreement also facilitated the movement of Russian food and fertiliser. 

Why did Russia back out of the deal?

The formal suspension comes days after Russian President Vladimir Putin during an interview said “not one” of Moscow’s conditions for the deal to function had been met. 

“I want to emphasise that nothing was done, nothing at all. It’s all one-sided,” said Putin. Reportedly, while Moscow’s exports of food grains and fertilisers are not subjected to Western sanctions, Russia has claimed that other restrictions on payments, logistics and insurance have had an indirect effect on its shipments. 

"The obligations recorded in the relevant Russia-UN memorandum to remove obstacles to the export of Russian food and fertilisers still remain unfulfilled,” Putin told his South African counterpart on Saturday, according to a statement by the Kremlin. 

Russia has also claimed that not enough grain is being sent to the poor countries, while the UN has argued that the deal had helped those states by lowering food prices by over 20 per cent across the world. Moscow also wanted ammonia exports through a pipeline leading from Russia to the Ukrainian port of Odesa to resume. 

Additionally, one of Russia’s key demands has reportedly not been met. Moscow wanted its Russian Agricultural Bank (Rosselkhozbank) to be reconnected to the SWIFT international payments system after it was cut off due to sanctions by the European Union in June 2022. 

A report by Reuters said that UN Secretary-General Antonio Guterres, last week, asked Putin to extend the Black Sea grain deal in exchange for the EU connecting a subsidiary of Rosselkhozbank to SWIFT for grain and fertiliser transactions. 

The same media report, citing three sources said, officials in the EU were also in the midst of considering reconnecting SWIFT to a subsidiary of the Rosselkhozbank. UN spokesman Stephane Dujarric had also confirmed a proposal by the UN chief saying that this was a “major concern expressed by the Russian Federation…”

Any immediate effects of the suspension?

According to reports, prices of grains and oilseeds have already risen in response to Russia’s decision and are expected to lead to higher prices for staple foods like bread, pasta, etc, in the upcoming weeks or months. 

But the rise is not as significant. “I think there is a market belief that Russia and the EU have large supplies of wheat which can meet world demand in the coming months, with harvests arriving,” a German grains trader told Reuters. 

The high costs may also exacerbate economic challenges for several countries and push millions more into poverty or food insecurity. The WFP used to purchase millions of tonnes of grain from Kyiv before the Ukraine war, mostly for African and West Asian countries. 

Ukraine exported 16.9 million tonnes of corn and 8.9 million tonnes of wheat, due to the grain deal with Russia. Amid this uncertainty, it was also not immediately clear whether Ukraine will be able to continue exporting grain after the Russian withdrawal from the pact. 

Another option could include increasing Ukrainian grain exports through eastern EU countries which have already risen exponentially since the conflict began.

However, there have been logistical challenges, in addition to unrest among farmers who said it has undercut local supplies. Since then the EU has allowed five countries to ban domestic sales of some Ukrainian grains and seeds but allow transit. 

Ukraine ready to export grains despite Russian exit: Zelensky

Ukrainian President Volodymyr Zelensky, in response to Russia’s decision, said that Kyiv is prepared to continue grain exports despite Moscow's backing out of the deal. 

“Even without the Russian Federation, everything must be done so that we can use this Black Sea corridor. We are not afraid. We have been approached by companies that own ships. They said that they are ready” to continue shipments, Zelensky said as per his spokesperson, Sergiy Nykyforov. 

Is it because of Crimea bridge attack?

The Kremlin suspension came hours after the Crimea Bridge, a very crucial and only direct link between the Russian mainland and the Moscow-annexed Crimean peninsula, was attacked. 

The bridge is also important for the supply of fuel, food and now weapons to Crimea, which Russia annexed in 2014. The attack has killed at least two people, a couple and injured their daughter, according to Russian officials. 

Kremlin spokesperson Dmitry Peskov told reporters that the decision to not renew the Black Sea grain deal was unrelated to the overnight attack, which he called a “terrorist act” and blamed on Ukraine. 

“Unfortunately, the part of these Black Sea agreements concerning Russia has not been implemented so far, so its effect is terminated,” said Peskov. He added, “As soon as the Russian part of the agreements is fulfilled, the Russian side will return to the implementation of this deal, immediately.” 

Putin wants to continue the deal: Erdogan

Turkish President Tayyip Erdogan said that he believed the Russian president wanted to continue the deal, despite the statement today and hopes talks will progress on the issue after Turkish Foreign Minister Hakan Fidan and his Russian counterpart Sergei Lavrov hold talks on Monday.

Countries react to Russia’s decision

German government spokesperson Christiane Hoffmann said they will continue to “call on Russia to allow further extension of the grain deal,” adding that the “conflict should not be carried out on the backs of the poorest on this planet.” 

UK Prime Minister Rishi Sunak’s spokesperson called Russia’s decision “disappointing” and accused Russia of risking global “suffering". Moscow “will be robbing millions of people of access to vital grain,” said the UK. 

EU chief Ursula von der Leyen “strongly condemned” Russia’s move and dubbed it “cynical”. She added, “EU is working to ensure food security for the world’s vulnerable.” 

(With inputs from agencies) 

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