Black Sea Grain Deal: Profitable Opportunities - SRIRAMs IAS

  Aug 05, 2023

Black Sea Grain Deal: On and Off

The Black Sea Grain Initiative was launched in Istanbul by the Russian Federation, Türkiye, Ukraine and United Nations on 22 July 2022. Through this initiative, a mechanism was established for the safe exports of grain, related foodstuffs and fertilizer, including ammonia, from designated Ukrainian ports on the Black Sea to global markets. The purpose of the Initiative is to contribute to the prevention of global hunger, to reduce and address global food insecurity, and to ensure the safety of merchant ships delivering grain and foodstuffs.

What has the initiative achieved so far?

The Black Sea grain deal has helped bring down grain prices and ease a global food crisis. Wheat prices have fallen about 17 percent, and corn is down about 26 percent. Ukrainian grain exports have been used by the United Nations World Food Programme to aid countries facing food insecurity.

Why did Russia terminate the deal?

Russia terminated the deal as it claimed that conditions for its extension had not been fulfilled, including demands related to the lifting of sanctions on the Russian Agricultural Bank; and resumption of supplies and services for its own grain, fertilizer and agricultural machinery. Russia wants to win relief from Western sanctions on Russia’s agricultural exports.

Can the Black Sea grain corridor operate without Russia?

The operation of the Black Sea grain corridor without Russia's involvement is uncertain, as Ukraine's ports were previously blocked until the agreement was reached. Additional war risk insurance premiums are expected to go up, and shipowners might be reluctant to enter a war zone without Russia's agreement.

Can Ukraine export more grain through the EU?

Ukraine has been exporting substantial volumes of grain through eastern EU countries since the conflict began, but logistical challenges, including different rail gauges, have been a concern. Some EU countries have restricted domestic sales of Ukrainian wheat, corn, rapeseed, and sunflower seeds while allowing transit for export elsewhere, but this is expected to be phased out by mid-September. Larger harvests in the eastern EU could lead to congestion and shipping delays in key ports.


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