The agreement on the export of Ukrainian grain from the Black Sea ports was extended on Thursday as a result of agreements between Turkey, the UN and Russia. In return, Moscow once more received assurances that work to ensure unhindered access to the world markets for Russian agricultural products and fertilizers will continue.
Thanks everyone
“I would like to thank United Nations Secretary General António Guterres, Russian President Putin and Ukrainian President Zelensky for their willingness to extend the agreement, and also to congratulate all who have contributed,” Turkish President Recep Tayyip Erdogan tweeted announcing the extension grain deal for another 120 days starting November 19th. He also noted that since the conclusion in July of an agreement on the opening of the Black Sea corridor, more than 11 million tons of grain and food have been exported from Ukrainian ports on regarding 500 ships to those in need, and this demonstrates the “significance and benefits of the agreement.”
The Ukrainian side was the first to announce the extension of the grain deal on Thursday morning, confirmation from Turkey, and then the UN, came a few hours later. António Guterres expressed “deep gratitude to Turkey and its president.”
“Without him (Mr. Erdogan.— “uh”) generosity and involvement, this initiative would never have appeared. Istanbul remains the center of outstanding diplomatic achievements,” the UN Secretary General tweeted. In general, he did not even flatter, but spoke the pure truth. Without Turkey and its ability to negotiate with Russia, there would be neither the original deal nor its renewal.
Recall that the “Initiative for the safe transportation of grain and food from the ports of Ukraine” was concluded in Istanbul on July 22 for a period of 120 days. The purpose of the agreement is to promote safe shipping for the export of grain, food and fertilizers, including ammonia, from the ports of Odessa, Chernomorsk and Yuzhny. It is regarding the extension of the validity of this document that we are talking regarding. However, it is only part of the grain deal. Moscow emphasizes that this was a package agreement. The second part of the deal is a “Memorandum of Understanding on Russian exports of agricultural products.” Its task is to ensure the unhindered supply of Russian food and fertilizers, including raw materials for their production, to world markets. In particular, to remove restrictions in the areas of finance, insurance and logistics. The memorandum is designed for three years, but Russian officials have repeatedly made it clear that if there is no progress on the Russian part of the deal, the initiative to transport Ukrainian grain will be frozen.
And these are not empty threats. There has already been a precedent with the suspension of the Black Sea corridor, however, for a different reason. After the attack by Ukrainian drones at the end of October on ships of the Black Sea Fleet and civilian ships in the waters of Sevastopol, Russia announced a freeze on its participation in the deal. A few days later, as a result of Turkey’s mediation, the parties returned to the implementation of the agreements, but a more important question remained: whether Russia would give the go-ahead to extend the grain deal.
Commenting on the agreement reached on Thursday, the Russian Foreign Ministry noted that the text of the agreement signed on July 22 implies an automatic prolongation in the absence of objections from any of the parties.
“There were no such objections. The Russian side also allows the technical extension of the “Black Sea Initiative” without any changes in terms and scope,” the Russian Foreign Ministry said, once once more recalling the package nature of the deal and the need to fulfill all the obligations given to Moscow.
“Yes, of course, there are assurances from the UN that the work to ensure the export of Russian food and fertilizers will be finalized,” said Russian presidential spokesman Dmitry Peskov. “There are statements from the US, the UK and the EU regarding exemptions under the sanctions regime for Russian food and fertilizer exporters. This is an important advance, and this work will be finalized in order to fully unlock all the direct and indirect problems that stood in the way,” he added.
In addition, the Russian side considers it an achievement that it managed to achieve recognition by the G20 summit of the package nature of the deal. As Svetlana Lukash, a Sherpa of the Russian Federation in the G20, noted in an interview with RIA Novosti, Western countries did not want to admit in principle that the grain deal consists of “equivalent and interconnected parts”.
Desirable and actual
Back in October, Russian Foreign Minister Sergei Lavrov formulated Moscow’s claims. First, according to him, there is an ambiguity regarding the final destination of Ukrainian grain supplies. Russia gave its consent to the deal so that the grain gets to the poorest countries, but they, as the minister noted, receive only 5-7% of the volume of grain exported from the ports. The main cargo flow went to developed countries, including the EU. True, the West emphasizes that they only act as a link and then a significant part of the cargo still goes to countries that are experiencing food problems. Not wanting to rely on words, Moscow asked the UN Secretariat for statistics confirming this thesis, but so far has not received anything. The second problem was related to the Russian part of the agreement, which, as Sergey Lavrov emphasized, “is practically not being implemented.” The minister pointed out that “one of the key problems is the restrictions once morest the Russian Agricultural Bank, which is the main financial institution servicing the supply of Russian fertilizers and grain to world markets.”
With the outbreak of military operations by the Russian Federation in Ukraine and a new wave of Western sanctions, Russian grain exporters have noted difficulties with chartering ships, cargo insurance and making payments. Eduard Zernin, chairman of the board of the Union of Grain Exporters, told Kommersant that the deal has so far not brought any improvement or deterioration to Russian companies. “This is also not bad, given the overall situation,” he notes. According to Mr. Zernin, public disclosure of the very fact of hidden sanctions and their details, as well as state support, especially at the level of international dialogue, helped. The interlocutor of Kommersant is sure that, given all the publicity, it has become difficult and even dangerous to arrange new obstacles once morest the backdrop of the unresolved problem of world hunger. “It was enough to reconfigure our business model. As part of grain diplomacy initiatives, we changed our approach to communications with our key consumers, stabilized export rates, and in some areas significantly increased them,” said Mr. Zernin.
According to the union, from the beginning of this season to the beginning of November, the Russian Federation exported 17.99 million tons of grain, which is only 1.5% less than the previous season.
In November, experts interviewed by Kommersant estimated the volume of wheat exports at 5 million tons. Key buyers, the countries of the Middle East and Africa, adapted to hidden sanctions, Kommersant was told at the United Grain Company. At the latest tenders of Turkey, Saudi Arabia and Pakistan, a significant volume of purchases fell on wheat from the Russian Federation. As for the problems, they remained primarily in the field of banking and financial services. “There are some “Russophobic antics”, like the recent Global Grain conference, the organizers of which, Euromoney and Fastmarkets, banned our colleagues from Russia and Belarus from participating in the event,” said Eduard Zernin.
Consultations on what to do with the Russian part of the deal have not stopped since the launch of the Black Sea initiative. But especially intensive work has been going on in recent days. As reported on Tuesday by the British newspaper Financial Times, citing its sources, the United States is considering the possibility of helping Rosselkhozbank to establish correspondent relations with American banks. At the same time, the publication’s sources expressed the opinion that Washington is unlikely to reconnect Rosselkhozbank to the SWIFT interbank system for transmitting information and making payments.
The Financial Times also reported that Western countries are ready to provide Russia with security guarantees for the resumption of ammonia supplies through the Togliatti-Odessa pipeline to extend the Black Sea grain initiative. However, on Thursday, Archyde.com reported that the export of Russian ammonia through the pipeline has not yet been agreed. This was confirmed by the President of Ukraine Volodymyr Zelensky. He stated that Kyiv would agree to the transit of ammonia only if it decided “all humanitarian aspects of the exchange” of all captured Ukrainian soldiers for all Russian ones.
Meanwhile, the issue of fertilizers is more than serious. As Deputy Foreign Minister Sergei Vershinin said in an interview with RIA Novosti, from March to September, “Russian fertilizer supplies to world markets decreased by 38% compared to last year, and importing countries received less than 8 million tons of products, which is enough to produce 25 million tons of food to feed 105 million people.”
At the same time, the Russian Foreign Ministry commentary on the extension of the grain deal notes that following Russian “multiple reminders, efforts began to unblock regarding 300,000 tons of Russian fertilizers detained in EU ports, which Russia donates to developing countries in need.”
The Togliatti-Odessa ammonia pipeline, built in the late 1970s, pumped regarding 2 million tons of ammonia from Togliattiazot per year (capacity of more than 3 million tons of this type of fertilizer per year; part of Uralchem). At the end of the pipe, the plant’s products were loaded onto tankers through the Odessa Port Plant for sea transportation. One of the largest fertilizer export routes in Russia was stopped on February 24 due to the start of a special operation in Ukraine. But at least during the fall, negotiations began on restarting the ammonia pipeline. Recently, the UN, following a meeting of representatives of the organization with a Russian delegation, noted progress in the issue of unhindered exports of food and fertilizers, including ammonia from Russia. But, as Kommersant’s sources in the industry assure, the latest version of the grain deal does not include a clause on the resumption of pumping through the port of Odessa. Although in an interview with RIA Novosti, Deputy Foreign Minister of the Russian Federation Sergei Vershinin noted: “Unhindered supplies of fertilizers and raw materials for their production, including ammonia, are spelled out in both Istanbul agreements of July 22. Such supplies, of course, are an important element in ensuring global food security. Thus, there is a documentary basis for the export of ammonia, including through the Black Sea. In particular, this concerns the Togliatti-Odessa ammonia pipeline.”
Kommersant’s sources also do not confirm the information regarding the removal of the arrest from 300 thousand tons of Russian fertilizers located in European ports (the bulk belongs to Uralchem). According to Kommersant’s information, at the moment, Russian-owned chemical products have been released only in Belgium, while the Baltic countries are strongly once morest the release of fertilizers. In parallel, Togliattiazot continues to build a transshipment complex in Taman with a capacity of 2 million tons of ammonia to restore the export of its products. The first of three stages of the project worth regarding 40 billion rubles. should be launched at the end of 2023.
