Food and fertilizer: Russia poised to backtrack on Ukraine grain deal

Concerns are growing that Russia will not extend a United Nations-brokered deal that allows grain to flow from Ukraine to parts of the world struggling with hunger, with ships no longer heading to the war-torn country’s Black Sea ports and food exports dwindling.

Turkey and the United Nations negotiated the breakthrough accord last summer to ease a global food crisis, along with a separate agreement with Russia to facilitate shipments of its food and fertilizer. Moscow insists it’s still facing hurdles, though data shows it has been exporting record amounts of wheat.

Russian officials repeatedly say there are no grounds for extending the Black Sea Grain Initiative, which is up for its fourth renewal Monday. It’s something they have threatened before – then have twice gone on to extend the deal for two months instead of the four months outlined in the agreement.

The U.N. and others are striving to keep the fragile deal intact, with Ukraine and Russia both major suppliers of wheat, barley, vegetable oil, and other food products that countries in Africa, the Middle East, and parts of Asia rely on. It has allowed Ukraine to ship 32.8 million metric tons (36.2 million tons) of grain, more than half of it to developing nations.

The deal has helped lower global prices of food commodities like wheat after they surged to record highs following the invasion last year, but that relief has not reached kitchen tables.

Russia’s exit would cut off a source for the World Food Program aid for countries at risk of famine, including Somalia, Ethiopia, and Afghanistan, and compound food security problems in vulnerable places struggling with conflict, economic crisis, and drought.

“Russia gets a lot of good public will for continuing this agreement,” said Joseph Glauber, senior research fellow at the International Food Policy Research Institute. “There would be a cost to pay in terms of public perception and global goodwill, I think, as far as Russia is concerned” if the deal isn’t extended.

The amount of grain leaving Ukraine already has dropped, with Russia accused of slowing joint inspections of ships by Russian, Ukrainian, United Nations, and Turkish officials and refusing to allow more vessels to join the initiative.

Average daily inspections – meant to ensure vessels carry only food and not weapons that could aid either side – have fallen from a peak of 11 in October to just over two in June.

That has led to a decline in grain exports, from a high of 4.2 million metric tons in October to 1.3 million in May, a low for the year-old initiative. They rose to 2 million in June as shipment sizes grew.

If the deal isn’t extended, “the countries that had relied on Ukraine for their imports are going to have to look at other sources for imports, very likely Russia, which is something that I imagine Russia was intending,” said Caitlin Welsh, director of the Global Food and Water Security Program at the Center for Strategic and International Studies.

The U.N. has been negotiating with Russia to stick with the initiative, with spokesman Stephane Dujarric saying Monday that top officials are “doing whatever we can to ensure the continuation of all of the agreements.”

Ukraine’s Infrastructure Ministry said Tuesday on Facebook that the final two ships are loading grain – heading for Egypt – while 29 vessels are waiting in the waters off Turkey because Russia has refused to allow their inspection.

“Ukrainian agricultural products play a significant role in global food security,” Infrastructure Minister Oleksandr Kubrakov said. But “for the past few months, the grain corridor has been practically closed.”

Russia insists the agreement hasn’t worked for its own exports, blaming Western sanctions for hindering financing and insurance.

While sanctions don’t affect food and fertilizer, Moscow is seeking carveouts from restrictions on the Russian Agricultural Bank, as well as movement on its ammonia, a key ingredient in fertilizer, to a Ukrainian Black Sea port. But the ammonia pipeline has been damaged in the war, the U.N. said.

“There is still time to implement the part of the agreements that pertains to our country. So far, this part has not been fulfilled,” Kremlin spokesperson Dmitry Peskov told reporters last week. “And so at the moment, unfortunately, we don’t see any particular grounds for extending this deal.”

Russia, however, has increased its wheat exports to all-time highs following a large harvest. Shipments went from 33 million metric tons in 2021 to 44 million metric tons last year to expectations of 46 million this year, according to S&P Global Commodity Insights.

Meanwhile, Ukraine’s shipments have fallen by around 60%, from 19 million tons in 2021 to predictions of about 7 or 8 million tons this year – a big hit to its agriculture-dependent economy.

With less from Ukraine and more from Russia, the world’s available wheat stocks are the same as in 2021 – and there is enough of it to go around, said Peter Meyer, head of grain analytics at S&P Global Commodity Insights.

Europe and Argentina are expected to boost wheat shipments, while Brazil saw a banner year for corn, of which Ukraine is also a major supplier. Meyer wouldn’t expect more than a temporary bump to grain prices on world markets if the Black Sea deal isn’t renewed.

“Markets just adapt extremely quickly,” he said. “The fact of the matter is that the global grain markets, they balance each other out.”

Ukraine can send its food by land or river through Europe, so it wouldn’t be completely cut off from selling grain, but those routes have a lower capacity than sea shipments and have stirred disunity in the European Union.

“We are a cat running out of lives in this situation,” said Simon Evenett, professor of international trade and economic development at the University of St. Gallen in Switzerland. “It only takes one thing to go wrong before we’re into trouble.”

While the U.N. Food and Agriculture Organization’s food price index has fallen below the record highs it hit when Russian troops entered Ukraine, food costs were already high because of COVID-19, conflict, and drought.

Then Russia’s war helped push up the costs to produce food – including energy, fertilizer, and transportation.

In developing nations increasingly relying on imported food, from Kenya to Syria, weakening currencies are keeping local prices high because they are paying in U.S. dollars.

“With approximately 80% of East Africa’s grain being exported from Russia and Ukraine, over 50 million people across East Africa are facing hunger, and food prices have shot up by nearly 40% this year,” said Shashwat Saraf, the International Rescue Committee’s regional emergency director for East Africa.

“It is vital for the international community to not only forge a long-term deal but also build durable solutions to tackle food insecurity,” he said.

This story was reported by The Associated Press. AP reporter Daria Litvinova in Tallinn, Estonia, and Edith M. Lederer at the United Nations contributed.