Russia warned on Wednesday that it would consider any ship sailing around Ukrainian ports a military target, days after Moscow pulled out of a one-year deal that allowed Kyiv to export its grain across the Black Sea despite a wartime blockade.
Russia’s moves have profound implications for Ukraine’s grain exports, a commodity vital to its own economy and world grain markets.
Here’s a look at alternative options for Ukraine to export its grain:
What is the immediate impact of Russia’s warning?
Russia’s Defense Ministry issued a warning to ship operators and other nations on Wednesday suggesting that any attempt to bypass the blockade could be seen as an act of war. Global grain prices rose sharply after the announcement, but they remained lower than the prices when Russia launched its full-scale invasion of Ukraine in February 2022. Prices appeared to stabilize on Thursday.
One reason prices haven’t risen is that Ukraine’s grain exports under the Black Sea Grain Initiative had already slowed to a trickle in the days before Russia pulled out of the deal on Monday, according to Sal Gilbertie, head of Teucrium, US-. based investment advisory firm.
How did Russia’s attacks on Ukrainian ports affect the situation?
Since Monday’s announcement, Russia has launched a series of nighttime airstrikes against Ukrainian ports, killing and injuring civilians. On Wednesday, an attack in Chornomorsk, just south of Odessa, also destroyed 60,000 tons of grain waiting to be loaded onto ships. That is enough to feed more than 270,000 people for a year, according to the World Food Program.
The airstrikes appeared to reinforce Russia’s determination to end the deal and its refusal to allow Ukrainian exports through the Black Sea. They also raise interest in how possible negotiations on reviving the deal could proceed.
Can Ukraine continue to export food across the Black Sea despite the threat from Russia?
President Volodymyr Zelenskiy of Ukraine spoke on Monday about establishing an agreement with Turkey and the United Nations, which helped broker the agreement, to continue grain exports independently of Moscow. There was no official response from either party to the idea. Russia’s warning on Wednesday, however, is likely to put off commercial shipping lines and raise the price of any shipping insurance which, in turn, would make Ukraine’s grain more expensive on the international market.
What does it mean for shipping?
The prospects of a restart now depend on military, diplomatic and commercial factors.
Six nations have a coastline on the Black Sea and it is a main conduit for Russia’s grain exports. Ukraine warned Thursday that it would view Russian ships bound for Russian ports or ports in occupied Ukraine as carrying “military cargo, with all the corresponding risks.” It was too early to say what effect this would have on Russian exports.
Can the deal be revived?
Russia said that from its perspective, the deal had been canceled rather than suspended, making the prospect of any quick revival less likely. In April, Moscow issued a series of demands it wanted met in exchange for renewing the grain deal, including allowing its agricultural bank to be reconnected to the SWIFT payment system to facilitate the marketing of its own grain, which it also ships. across the Black Sea.
António Guterres, the secretary-general of the United Nations, made proposals on how to meet some of Russia’s demands but Moscow backed off anyway. He expressed disappointment at Russia’s decision, which he said would hurt people around the world facing food insecurity.
Turkey and China are big buyers of Ukrainian grain and could pressure President Vladimir V. Putin of Russia to accept a renegotiated deal, according to two analysts. Leaders of both countries have remained on good terms with Mr. Putin since the invasion began. Mr Putin is also expected to visit Turkey next month, where he will hold talks with President Recep Tayyip Erdogan, broker of the grain deal signed last year.
What are Ukraine’s alternatives?
Ukraine can transport its grain by road and rail into neighboring European countries, including Poland, as well as by barges on the Danube River to other Ukrainian ports at Izmail and Reni, as well as to the Romanian port of Constanta. These routes have sufficient capacity to export all of the country’s grain, according to Benoît Fayaud, deputy executive director of Strategie Grains, an agricultural economic research firm.
However, exports via those routes are more expensive and, as a result, Ukrainian grain, currently among the cheapest in the world, would become less competitive, according to Arif Husain, chief economist of the World Food Program. To keep prices low, the amount paid to Ukrainian farmers should be lowered, negatively affecting future agricultural investment, he said.
“This Black Sea agreement was a lifeline for the Ukrainian farmers,” he said.
Are road and rail routes still viable?
Last summer, the European Union took steps to smooth the way for Ukraine’s overland grain exports, due to the Russian Black Sea blockade. However, after protests by farmers in some EU countries, the bloc allowed Bulgaria, Hungary, Poland, Romania and Slovakia to ban the domestic sale of Ukrainian wheat, corn, rapeseed and sunflower seeds, although they continued to allow the transit of these items for export. elsewhere. . The ban is expected to end on September 15.
Ministers from those five countries asked on Wednesday that the bloc allow the bans to be extended.
“From the perspective of the agricultural sector, the war in Ukraine has had increasingly important effects on the agricultural market,” Poland’s prime minister, Mateusz Morawiecki, told reporters. “Such factors must be removed or changed. That’s why we closed the borders for products from Ukraine when they flooded and destabilized the agricultural market.”
Monika Pronczuk contributed reporting.