What Russia's threats to Black Sea grain ships mean for the Ukraine war, global food supplies
After quitting UN-brokered grain export deal, Moscow threatens Black Sea food shipping
Russia has warned that from Thursday any ships travelling to Ukraine's Black Sea ports will be seen as possibly carrying military cargoes after Ukraine said it was setting up a temporary shipping route to try and continue its grain exports.
The moves by both countries on Wednesday came just days after Russia quit a deal — brokered by the United Nations and Turkey — that allowed the safe Black Sea export of Ukraine grain for the past year, and revoked its guarantees of safe navigation.
Ukraine has made clear that it wants to try and continue its Black Sea grain shipments. But Russia's Defence Ministry then said it would deem all ships travelling to Ukraine to be potentially carrying military cargo and "the flag countries of such ships will be considered parties to the Ukrainian conflict."
The disintegration of the Black Sea grain deal not only complicates the political and military calculus for all parties involved in Russia's invasion of Ukraine, it threatens to push the world's poorest countries closer to a food crisis.
What's the situation in the Black Sea?
The Russian Defence Ministry issued a statement that Moscow has declared international waters in northwestern and southeastern parts of the Black Sea "temporarily dangerous" for shipping. The ministry warned it will see any incoming vessel as laden with military cargo starting from midnight.
"The countries whose flags those ships will fly will be seen as involved in the Ukrainian conflict on the side of the Kyiv regime," it said.
The Defence Ministry did not say what actions it might take, but cargo insurers were already reviewing their appetite for covering ships into Ukraine.
"Due to the collapse of the Black Sea corridor deal, most ship owners will now refrain from calling Ukrainian ports," Christian Vinther Christensen, chief operating officer with Danish shipping group NORDEN told Reuters.
Insurance has been vital to ensure shipments through the corridor and industry sources said the suspension by Russia was being evaluated in terms of whether cover in some form could continue.
"Some underwriters will look to take advantage with a hefty increase in rates. Others will stop offering cover. The [key] question is whether Russia mines the area which would effectively cease any form of cover being offered," one insurance industry source told Reuters.
What does this mean for Ukraine's grain routes?
Ukraine, which wants to try to continue Black Sea grain shipments vital to global food supplies, said on Wednesday it was setting up a temporary shipping route via Romania.
In a letter to the UN's shipping agency, the International Maritime Organization, Ukraine said it had created a "mechanism" to provide "guarantees of compensation for damage" to charterers, ship operators and owners of vessels "caused as a result of the armed aggression" of Russia.
It said this would be offered while the commercial ships were in Ukraine's territorial waters or when such vessels were heading to or from the country's open sea ports for cargo transportation.
Ukrainian President Volodymyr Zelensky has previously said the Black Sea grain deal could continue without Russian participation, and Kyiv is working on options to keep its commitments on global food supplies.
There are a "number of ideas being floated" to help get Ukrainian and Russian grain and fertilizer to global markets, the United Nations said on Tuesday.
What are Russia's concerns?
Moscow said it quit the grain deal because its demands to improve Russian grain and fertilizer exports were not met. Further, the Kremlin complained not enough Ukrainian grain was reaching poor countries under the deal.
Western countries say Russia is trying to use its leverage over the grain deal to weaken financial sanctions, which do not apply to Russia's agricultural exports.
Russian President Vladimir Putin has said Moscow would return to the deal as soon as the West meets five key demands, which are:
- Readmission of the Russian Agricultural Bank (Rosselkhozbank) to the SWIFT payment system.
- Resumption of exports of agricultural machinery and spare parts to Russia.
- Removal of restrictions on insurance and access to ports for Russian ships and cargo.
- Reinstatement of a now-damaged ammonia export pipeline from Russia's Togliatti to Odesa in Ukraine.
- The unblocking of accounts and financial activities of Russian fertilizer companies.
"If all these conditions are fulfilled, which we previously agreed on — they are not something I have invented now — but as soon as they are fulfilled, we will immediately return to the deal," Putin said.
Russia's Foreign Ministry gave the UN three months to implement the terms if it wanted Russia to return to the grain deal.
How will poor countries be impacted?
The Black Sea grain deal was a wartime initative that enabled Ukraine — one of the world's top grain exporters — to ship its grain to many countries facing the threat of hunger.
The war in Ukraine sent food commodity prices to record highs last year and contributed to a global food crisis, which was also tied to other conflicts, the fallout from the pandemic and climate factors.
High grain prices in countries like Egypt, Lebanon and Nigeria exacerbated economic challenges and helped push millions more people into poverty or food insecurity.
The UN estimates the July 2022 deal allowed Ukraine to exports 32.9 million metric tons of grain.
The International Monetary Fund on Wednesday said Russia's exit from the deal threatens to increase global food insecurity and could raise food prices, especially in poor countries.
Ukraine's Agriculture Minister Mykola Solskyi warned that if Kyiv cannot export food, "The price of grain will increase, and not all countries will be able to afford buying agricultural products, which means food prices will significantly rise: flour, cereals, meat."
Wheat prices rose more than 2.5 per cent on Tuesday and nearly 8 per cent on Wednesday amid Russian attacks in Odesa, a key hub for exporting grain, illustrating jitters in global markets. The bombardment of Odesa and nearby Chornomorsk destroyed 60,000 tons of grain, according to Ukraine's Agriculture Ministry.
Wednesday's trading price of $7.23 US a bushel still was nearly 80 per cent below last year's peak.
Rising food prices affect people in developing countries disproportionately because they spend more of their money on meals. Poorer nations that depend on imported food priced in dollars also are spending more as their currencies weaken and they are forced to import more because of climate change.
With files from The Associated Press