Putin's Grain Blackmail
Russia demands the lifting of sanctions on its financial system and external trade. Otherwise, it refuses to extend the grain agreement after July 17th, an agreement that it has effectively blocked in recent months. The last ship that sailed under the UN-brokered agreement allowing the safe export of Ukrainian grain and vegetable oil through the Black Sea left the port of Odesa on the morning of July 16th, according to the vessel monitoring service MarineTraffic.com. Russia has refused to register new ships since June 27th, and the UN grain initiative will expire on July 17th unless the Kremlin agrees to extend it.
What is this grain agreement?
Before Russia's military intervention in Ukraine in late February 2022, Kyiv and Moscow accounted for nearly a quarter of the world's grain exports. Agricultural supplies were halted for almost six months until representatives from Ukraine, Russia, the UN, and Turkey agreed to establish a humanitarian maritime corridor under the Black Sea Grain Initiative.
This grain agreement was reached in July 2022 and eased the Russian blockade of three key Ukrainian ports near Odesa in southern Ukraine.
According to the agreement, over 1,000 vessels transported nearly 33 million metric tons of agricultural products from Ukrainian ports, including Odesa, Chornomorsk, and Pivdennyi. This significantly slowed down the rise in global food prices and had a positive impact even on the prices in European supermarkets.
The agreement also included the transportation of 0.725 million tons of wheat for shipment to some of the world's most unstable countries, such as Afghanistan, Ethiopia, Somalia, Sudan, and Yemen, on World Food Program vessels.
However, according to the UN, no ships have departed from the Ukrainian port of Pivdennyi for almost three months. Moreover, in the last two weeks, no new ships have been allowed to leave Ukraine.
In essence, Putin has effectively blocked the grain agreement since June 2023, just a month after its latest extension.
What is Putin blackmailing for?
The spokesperson for the United Nations stated on July 14th that UN Secretary-General António Guterres is awaiting a response from Russian President Vladimir Putin regarding the proposal to extend the agreement.
During a phone conversation with South African President Cyril Ramaphosa on July 15th, Putin stated that the commitments to remove obstacles for Russian food and fertilizer exports have not yet been fulfilled, according to the Kremlin.
Russia has repeatedly threatened to withdraw from the agreement brokered by the UN and Turkey in July 2022 following Russia's invasion of Ukraine. It was previously extended for two months from May 17th.
Russian President Vladimir Putin and Moscow's chief diplomat Sergey Lavrov have accused the West of creating global danger and instability. However, these accusations are baseless.
To understand the roots of this blackmail, we need to recall statements made by Russian leaders. For instance, in April 2023, Russia's Foreign Minister Sergey Lavrov demanded the inclusion of mineral fertilizers in the list of cargoes covered by the Black Sea Grain Initiative. Otherwise, Moscow threatened not to extend the agreement beyond May. However, they eventually extended it.
In addition to the inclusion of fertilizer exports, the Kremlin also demanded the resumption of operations for the ammonia pipeline that passes through Russia and ends in a Ukrainian port. The situation with this pipeline is intriguing - there is no information about its destruction, even though it crosses the front line in the eastern Kharkiv region. Since the start of hostilities, the ammonia transportation through the pipeline has been halted, and the compressor facilities have been put on standby.
After the Ukrainian forces liberated the Kharkiv region in September 2022, Ukrainians gained control of the state border everywhere in the region except for a small area in the east. This area, where the ammonia pipeline crosses the front line, remains under the control of Russian forces. The level of fighting there is significantly lower compared to areas located a hundred kilometers south, such as the Luhansk and Donetsk regions, including the area around Bakhmut.
Another major demand from Moscow is the return of Rosselkhozbank to the SWIFT (Society for Worldwide Interbank Financial Telecommunication) banking system for money transfers. Russia's exclusion from SWIFT due to sanctions severed its ties with many global financial networks. In May, an EU representative stated that the EU is not considering the possibility of reinstating Russian banks.
However, the EU is considering the option of connecting Rosselkhozbank's subsidiary to SWIFT to allow Russia to conduct operations related to grain and fertilizers.
Ankara's Assistance to the UN Again
Turkish President Recep Tayyip Erdogan announced on July 14th that Russia had agreed to extend the Black Sea Grain Initiative, because he and Vladimir Putin were "on the same page." However, as of midday on July 16th, the Kremlin has not confirmed this agreement.
Erdogan referred to a phone conversation with Russian President Vladimir Putin and his future visit to Turkey: "We are preparing to welcome Putin in August, and we have agreed to extend the Black Sea grain corridor."
In the past, Erdogan has been able to sway Putin's actions with careful diplomacy. It is likely that he will achieve the same in August, not only out of philanthropy but also due to Turkey's significant earnings from Black Sea transit. Besides its commercial benefits, Turkey also gains geopolitical advantages.
Why is the Black Sea Grain Initiative and the Solidarity Corridors of the EU crucial for supporting Ukrainian exports? These projects have helped reduce and stabilize food prices. Even prosperous EU countries have reaped substantial benefits: the supply of high-quality Ukrainian corn has supported poultry farming and animal husbandry in many EU countries. European farmers have increased their profits amidst stable prices in supermarkets.
The biggest beneficiaries are the less affluent countries: approximately 64% of Ukrainian wheat exports went to developing nations. Corn, on the other hand, was exported almost equally to both developed and developing countries. According to the World Food Programme, Ukrainian grain feeds around 400 million people worldwide. Turkey played a role in the conclusion of the Black Sea Grain Initiative in July 2022, and it has been renewed multiple times since then.