Fri. Jul 19th, 2024

Russia halted a breakthrough wartime deal on Monday that allows grain to flow from Ukraine to countries in Africa, the Middle East and Asia where hunger is a growing threat and high food prices have pushed more people into poverty.

Kremlin spokesman Dmitry Peskov said Russia would suspend the Black Sea Grain Initiative until its demands to get its own food and fertilizer to the world are met. While Russia has complained that restrictions on shipping and insurance have hampered its agricultural exports, it has shipped record amounts of wheat since last year.

“When the part of the Black Sea deal related to Russia is implemented, Russia will immediately return to the implementation of the deal,” Peskov said.

The suspension marks the end of an accord that the U.N. and Turkey brokered last summer to allow food to leave the Black Sea region after Russia’s invasion of its neighbor worsened a global food crisis. The initiative is credited with helping lower soaring prices of wheat, vegetable oil and other food commodities.

Ukraine and Russia are both major global suppliers of wheat, barley, sunflower oil and other affordable food products that developing nations rely on.

The suspension of the deal sent wheat prices up about 3% in Chicago trading, to $6.81 a bushel, still about half what they were last year during last year’s peaks, but fell later in the day.

Analysts don’t expect more than a temporary bump to global food commodity prices because places like Russia and Brazil have ratcheted up wheat and corn exports. But food insecurity worldwide is growing as developing countries also struggle with climate change, conflict and economic crises. Finding suppliers outside Ukraine that are farther away also could raise costs.

The grain deal provided assurances that ships won’t be attacked entering and leaving Ukrainian ports, while a separate agreement facilitated the movement of Russian food and fertilizer. While Western sanctions do not apply to Moscow’s agricultural shipments, some companies may be wary of doing business with Russia.

Ukrainian President Volodymyr Zelenskyy said he wanted to keep the initiative going even without Russia’s safety assurances.

“We are not afraid,” he said. “We were approached by companies that own ships. They said that they are ready, if Ukraine gives it, and Turkey continues to let it through, then everyone is ready to continue supplying grain.”

Turkish President Recep Tayyip Erdogan said the country’s foreign minister would speak with his Russian counterpart Monday — and that he was hopeful the deal would be extended.

The Black Sea Grain Initiative has allowed three Ukrainian ports to export 32.9 million metric tons of grain and other food to the world, according to the Joint Coordination Center in Istanbul.

Russia has repeatedly complained that the deal largely benefits richer nations. JCC data shows that 57% of the grain from Ukraine went to developing nations, with the top destination being China, which received nearly a quarter of the food.

The agreement was renewed for 60 days in May, but in recent months, the amount of food shipped and number of vessels departing Ukraine have plunged, with Russia accused of preventing additional ships from participating.

High costs for grain needed for food staples in places like Egypt, Lebanon and Nigeria exacerbated economic challenges and helped push millions more people into poverty or food insecurity.

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.

Under the deal, prices for global food commodities like wheat and vegetable oil have fallen, but food was already expensive before the war in Ukraine and the relief hasn’t trickled down to kitchen tables.

The end of the initiative creates “instability and uncertainty” in global food markets that could raise prices and increase food insecurity for vulnerable nations already seeing their local crops die because of climate change, said Shashwat Saraf, the International Rescue Committee’s regional emergency director for East Africa.

The U.N. Food and Agriculture Organization said this month that 45 countries need outside food assistance, with high local food prices “a driver of worrying levels of hunger” in those places.

Now, it’s key to watch whether Russia “weaponizes” its wheat exports, said Simon Evenett, professor of international trade and economic development at the University of St. Gallen in Switzerland.

Being the world’s largest wheat supplier right now, Russia could hike its export taxes, which “would raise world grain prices as well as allow Russia to finance more of its military campaign in Ukraine,” Evenett said. He noted that Moscow already raised them slightly this month.

The grain deal has faced setbacks since it was brokered by the U.N. and Turkey: Russia pulled out briefly in November before rejoining and extending the deal.

In March and May, Russia would only renew for 60 days, instead of the usual 120. The amount of grain shipped per month fell from a peak of 4.2 million metric tons in October to over 2 million metric tons in June.

Ukraine has accused Russia of preventing new ships from joining the work since the end of June. Joint inspections meant to ensure vessels only carry grain and not weapons that could help either side also have slowed considerably.

Asked Monday whether an attack on a bridge connecting the Crimean Peninsula to Russia was a factor in the decision on the grain deal, the Kremlin spokesman said it was not.

Meanwhile, Russia’s wheat shipments hit all-time highs following a large harvest. It exported 45.5 million metric tons in the 2022-2023 trade year, with another record of 47.5 million metric tons expected in 2023-2024, according to U.S. Department of Agriculture estimates.

By Habeeb

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