A Countermove: What If the Grain Deal Goes Without Russia?

On the night of July 18-19, Russian Armed Forces launched missile and drone attacks on civilian objects in the ports located in Odesa and its surroundings on the Black Sea coast of Ukraine. They attempted to destroy terminals for grain and vegetable oil exports. It was exactly a year ago, on the eve of the grain deal with Russia, when they did the same, shelling Ukrainian trade ports. Once again, the world received a signal that Russia prefers blackmail over honoring its commitments.

During the night of July 19, 2023, Russian Armed Forces targeted the port infrastructure around Odesa using air, ground, and sea-launched cruise missiles, as well as Iranian-made strike drones "Shahed-136/131". They employed 16 sea-launched cruise missiles "Kalibr", of which 13 were intercepted by Ukrainian air defense systems. Additionally, 8 Kh-22 cruise missiles and 1 Kh-59 guided aviation missile were launched, with last one being intercepted. The Russians also fired 6 "Oniks" cruise missiles from the "Bastion" coastal missile system in Crimea. Ukrainian air defense managed to intercept 23 out of 32 "Shahed-136/131" strike drones.

This was already the second consecutive night that Russia attempted to destroy export terminals in Odesa and Mykolaiv. On the night of July 18, 2023, the Russians launched six "Kalibr" sea-launched cruise missiles and 36 "Shahed" strike drones. Ukrainian air defense successfully intercepted all the cruise missiles and 31 strike drones.

All of this should be seen as an attempt to pressure Ukraine, Turkey, and the UN into accepting Russia's blackmail conditions, particularly regarding lifting sanctions on Russian banks and specific export items. Why does Russia insist on lifting sanctions? Because these sanctions hinder their financing of the war against Ukraine.

And this is not the first time. On June 22, 2022, a terminal for vegetable oil exports was damaged in the port of Mykolaiv, which is 110 km east of Odesa. Back then, Russian Armed Forces also used anti-ship cruise missiles "Oniks" from the "Bastion" coastal missile system in Crimea. Moscow used similar tactics of coercion against Turkey, the UN, and Ukraine, demanding the cancellation of sanctions.

Why Ports are Targets?

The answer to this question is quite simple, and it was already articulated in broadcasts on Russian TV channels when they demanded the destruction of grain and vegetable oil terminals in Ukrainian ports to eliminate the grounds for the grain deal. The grain deal, concluded a year ago and extended multiple times, prevented a global food crisis. Ukrainian food exports, consumed by nearly half a billion people worldwide, kept prices stable not only for poorer countries but also benefited relatively affluent EU countries. Ukrainian sunflower oil and corn curbed price increases in European supermarkets too. While German and Italian households directly benefited from the Ukrainian vegetable oil, european farmers relied on Ukrainian grain to feed livestock and poultry.

But first of all, under the grain deal, more than 725 thousand tons of food reached Afghanistan, Ethiopia, Djibouti, Kenya, Sudan, and other poor countries through the UN's World Food Program.

Photo: People in Dabat, Ethiopia, receive wheat sourced from Ukraine at a WFP distribution point in March. Source: WFP/Claire Nevill

Moscow's blackmail with inflation and hunger is what's happening here. That's why Russian rockets are flying towards Ukrainian ports.

And it's not just that Russia is attempting to block the export of Ukrainian food; the export of grain and oil from Ukraine actually helps restrain the rising prices in the global food market. Russia's aim, in fact, is to increase its own profits from food exports. In the marketing year 2022-2023, grain sales from Russian ports reached a colossal 60 million tons. Among them, Russian companies were selling grain that had been stolen from Ukrainian elevators and terminals on the occupied territory.

How did the overall impact of Russian aggression and recent events surrounding the grain deal affect things? On July 17th, wheat futures on the Chicago Board of Trade rose by 2.7% to $6.80 per bushel, and corn futures increased by 0.94% to $5.11 per bushel. This way traders reacted to the prospects of reduced supplies of essential food items due to the disruption of the grain deal.

Later, wheat prices began to decline as hopes of normalization emerged. It's worth noting that current wheat prices are 54% lower than the historical peak reached in March 2022, after Russia's full-scale invasion of Ukraine. Corn prices are currently 37% lower than they were in April 2022 when they reached a 10-year high.

Photo: Look into Grain Deal. Source: UN

This illustrates the impact of Russian blackmail on the global food market, affecting the wallets of everyday consumers from Africa to Germany, Spain to Afghanistan.

Another reason for Russia's attacks on Ukrainian ports is to block the participation of foreign transport and insurance companies in the logistics of Ukrainian exports. There are already reports of certain insurance companies refusing to insure shipments from Ukrainian ports.

What's next?

There are three possible paths: either forcing Russia to fulfill its obligations, resorting to force to ensure independent exports outside agreements with Moscow, or a combination of both approaches.

Kyiv insists that the grain deal consists of two separate components: an agreement between Ukraine, the UN, and Turkey as the guarantor, and another agreement between Russia, the UN, and Turkey. There is no direct agreement between Kyiv and Moscow.

Ignoring Ankara's insistence, and therefore the UN's, is unlikely for Moscow, as the Bosporus and Dardanelles straits are also gateways for Russian exports, including food, oil, and metallurgical products. Additionally, Turkey is a transit hub for Russia's imports, including various types of equipment, raw materials, and components critical to Russia's industry, which has now shifted towards servicing its armed forces.

Photo: Grain Deal month by month. Source: UN

The grain deal known as the "Black Sea Grain Initiative," brokered by the UN and Turkey, ended on July 17th after another extension in May.

Turkish President Recep Tayyip Erdoğan has expressed hope of persuading Russian President Vladimir Putin to reinstate the agreement. It seems this may happen in August during Putin's already announced visit to Turkey.

Ukrainian President Volodymyr Zelensky stated that Moscow violated its agreement with the UN and Mr. Erdoğan, not with his country, as Ukraine had a separate deal with the two mediators. Now, Ukrainian diplomats are negotiating the transit of ships carrying Ukrainian cargo through the territorial waters of Romania and Bulgaria.

Zelensky remains hopeful of a powerful negotiator winning over such as Recep Erdoğan. "Even without the Russian Federation, we need to do everything to use this Black Sea corridor," Volodymyr Zelensky said. "We are not afraid. Companies that own ships have approached us, saying that if Ukraine releases [the cargo], and Turkey lets it pass, they are all ready to continue grain supplies."

U.S. Secretary of State Antony J. Blinken, speaking to journalists on July 17th, stated that the United States would work with Ukraine to find alternative export routes, including by rail, but added that "it’s really hard to replace what’s now being lost as a result of Russia weaponizing food."

It seems that for Russia, this has become a tradition: first gas as an energy weapon, and now grain as a food weapon.

Photo: Grain Deal saves. Source: UN