The potential renewal of the Black Sea Grain Initiative is again facing doubt and confusion, with Russia seeking a shorter-term arrangement unless payment issues affecting its agricultural exports are resolved.
The UN-brokered initiative, which allows for the safe passage of wheat, corn, sunflower products and other soft commodities from Ukrainian Black Sea ports, is due to renew automatically on March 18 for a further 120 days unless Russia, Ukraine and Turkey withdraw from the deal.
In a statement issued on March 14, Rebeca Grynspan, head of the UN Conference on Trade and Development (UNCTAD), says the organisation is “doing everything possible to ensure continuity of the initiative”.
However, Russian negotiators have raised concerns over a separate memorandum of understanding (MOU) signed in July last year that vowed to facilitate exports of the country’s food, fertiliser and related raw materials.
In a statement this week, deputy foreign minister Sergey Vershinin said there have been issues putting that MOU into practice, and that support for Ukrainian exports would depend on whether there is “tangible progress on normalisation of our agricultural exports”.
That would require problems around “bank payments, transport logistics, insurance, ‘unfreezing’ of financial activities and ammonia supplies via the Tolyatti-Odessa pipeline” to be overcome, he said.
As a result, Russia is saying it will only agree to a 60-day extension of the initiative.
It is unclear how that is compatible with the existing text of the agreement, which only facilitates renewal in 120-day periods. An unnamed Ukrainian official told Reuters this week that a shorter duration would require a new agreement to be put in place before Saturday, an “unlikely” prospect.
UN officials say they have “spared no efforts to facilitate that trade”.
“Meaningful progress has been made but it is true that some obstacles remain, notably with regard to payment systems,” Grynspan says. “Our efforts to overcome those obstacles will continue unabated.”
Western sanctions have not explicitly targeted Russian agriculture exports, but could affect transactions denominated in dollars, euros or pounds. Many companies have also sought to withdraw from Russian trade on reputational grounds.
A representative for the UN Joint Coordination Centre, which is responsible for overseeing the operations of the grain initiative, did not comment when asked for details on the payment issues cited by Grynspan.
The crisis talks follow research from UNCTAD hailing the impact of the initiative on global food prices, but warning that more needs to be done to restore exports to pre-war levels.
“Notably, for every tonne of wheat shipped from Ukraine to developing countries in 2022, there is a gap of two tonnes,” it says in a report issued this week.
“The gap of 11.8 million tonnes is equivalent to the annual wheat food consumption of 175 million people, roughly the population of Bangladesh. For corn and barley, the export gap is as large as 41% and 82%, respectively, of the previous year’s level.”
Exports to least developed countries have been a flashpoint in previous initiative renewal talks, with Russia complaining that the majority of goods were being shipped to the EU, UK and Turkey, rather than to nations at serious risk of food shortages.
UNCTAD’s most recent research finds that wheat exports to least developed countries have doubled since the start of the war, and that two-thirds of exports to those markets were facilitated by the initiative. Nonetheless, it says there remains a “substantial gap” compared to export figures for 2021.
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