Russian wheat is a key component of the international food security system
Afrasianet - The escalation of cross-attacks and the targeting of ships and ports in the Black Sea has paralyzed operations and halted the entry of ships into the Ukrainian ports of Odesa for weeks, threatening global food security and prompting Ukraine to adopt partially alternative export routes amid the disruption of the main sea lane.
Impact of Attacks on Export Traffic
• Shipowners stopped mooring their ships in the Ukrainian ports surrounding Odessa altogether.
• No new ships have entered those ports since mid-summer.
• Russia has also reported similar strikes on its facilities and commercial vessels.
• The prices of grains and seeds in Ukraine fell by about 30% due to the accumulation of crops.
Temporary Alternatives and Solutions
• Ukraine resorts to shipping via the Danube River, railways and road routes.
• These alternative routes cover only 50% to 55% of the former seaport capacity.
• The Danube Trails face obstacles from low water levels and river drying.
Potential global repercussions
• A direct threat to about half of Ukraine's projected total grain exports this year.
• Official warnings of a sharp jump in global food prices and the inability of poor groups to afford it.
Russia warns of halt in grain exports across Black Sea
Russia's grain exporters and producers association warns that Ukraine's escalating attacks on Russian commercial ships and ports in the Black Sea could lead to a halt in grain exports through this vital corridor in the near future, which could be reflected in food prices and increase pressure on importing countries, especially in Africa Middle East.
Considered Russia, the world's largest exporter of wheat, Ukraine, one of the world's leading exporters of agricultural products, has intensified in recent weeks counter-attacks targeting grain export facilities and commercial vessels in the Black Sea region, raising growing concerns about the safety of navigation.
"The systematic attacks that began in July could soon lead to the complete closure of export corridors in the Black Sea basin," the union said in a statement, warning that the repercussions would not be limited to the region, but would spill over to global markets.
He added that the shortage of Russian wheat supplies during the current season may range between 30 and 35 million tons, which is equivalent to about 15% of the total global wheat trade, stressing that other producers will not be able to make up for this deficit.
The federation pointed out that the navigation disruptions resulting from the targeting of dry cargo ships and port infrastructure represent a direct threat to global food security, in light of the dependence of many countries on grain exports coming from the Black Sea region.
The EU believes that continued attacks could exacerbate pressures on global supply chains, lead to higher grain and food prices, as risks to maritime trade in one of the world's most important wheat export corridors increase.
What does the end of the Ukrainian grain export agreement mean?
The grain agreement between Ukraine and Russia was aimed at ensuring the export of Ukrainian grain stuck due to the war. If exports are halted, what other options are available to avoid a global food crisis?
Russia and Ukraine signed the UN-sponsored grain agreement with Turkish mediation aimed at ensuring the shipment of Ukrainian grain stuck in ports across the Black Sea due to the war, while UN Secretary-General Antonio Guterres described the agreement as a "beacon of hope".
Since then, the agreement, officially known as the Black Sea Grain Transport Initiative, has been extended several times, but the Kremlin announced on Monday (July 17, 2023) that Russia had suspended its participation in the deal to export grain through the Black Sea.
The deal brokered by the United Nations and Turkey last July aims to ease the global food crisis by safely opening the door for export to Ukrainian grain that has been blocked by the Russia-Ukraine conflict, which could have consequences for large parts of the world.
The importance of the agreement?
The agreement is important because of Ukraine's position in the global grain market, as it is one of the largest suppliers of grain with 400 million people worldwide dependent on Ukrainian grain, according to figures from the World Food Programme.
When Russia began its military operation in Ukraine in late February 2022, many countries around the world expressed fears of famine, especially in poor countries in Africa and the Middle East, amid growing concern that time was running out to remove the specter of a famine crisis.
Prior to the war against Ukraine, food prices had risen due to the repercussions of the Corona pandemic and the supply chain crisis.
What if the deal collapses?
If Russia does not agree to extend the grain deal, the fate of Ukraine will be uncertain if Ukraine continues to ship grain to the countries of the world at the same rates as it currently is, while the increase in the security of cargo ships will be very problematic, as this may result in international shipping companies stopping transporting grain in the war zone if it does not obtain Russian approval.
In the face of this, some may suggest the option of transporting Ukrainian grain by land as a suitable refuge, but this option will not be a substitute for transportation by sea, as although Ukraine has exported large quantities of grain through the countries of the Eastern European Union, there are not enough freight vehicles needed to export all Ukrainian grain by land.
In addition, there is concern among farmers in the eastern EU countries about the impact of Ukrainian grain supplies shipped to the local market amid fears that it could overshadow their products. In response, the EU earlier imposed import restrictions allowing Ukrainian grain to be transported through Bulgaria, Hungary, Poland, Romania and Slovakia, but with a ban on its sale in those countries.
How does the agreement work?
The agreement allows for the safe export of grain from Ukraine's Black Sea ports of Odesa, Chornomorsk and Vedny, which are under Ukrainian control, but cargo ships must pass through an agreed humanitarian sea lane towards Istanbul where ships en route to and from Ukrainian ports are inspected at a Turkish base by a special team of inspectors that includes Russian, Turkish, Ukrainian and UN experts.
Two U.N. task forces are working to ensure that Ukrainian grain is shipped through the Black Sea, but are not facilitating the export of Russian food products and fertilizers.
Is the agreement a success?
The agreement, as well as the so-called "European Solidarity Corridors" in support of Ukrainian exports, helped reduce and stabilize food prices, as more than 30 million tons of grain and other food products were exported since the signing of the agreement until last month.
Poor countries are the biggest beneficiaries as about 64% of wheat has been shipped to developing countries while corn has been exported almost equally between developed and developing countries, but in March, media reported that Ukrainian grain shipments were steadily declining.
As a result, total food exports under the agreement fell by about three-quarters in May compared to last October's averages. This is due to several reasons, most notably that shipping companies have begun to avoid the risk of sending ships via risky routes as well as restrictions on the passage of ships.
The Russian side, on the other hand, complains that its demands on the export of Russian agricultural products have not been met due to the continued implementation of Western sanctions since the beginning of its invasion of Ukraine. Russian President Vladimir Putin told the African mediator delegation last week that the agreement has not solved the problems faced by African countries due to rising global food prices, and that only 3% of Ukraine's grain exports go to poor countries.
The importance of the Black Sea to the global market?
The Black Sea is located at the crossroads of Europe, Asia and the Middle East and represents an important strategic location in Southeast Europe in a region where maritime, continental, geostrategic and economic interests converge.
In light of this importance, the Black Sea is Ukraine's only opportunity to export its grain to Europe and then connect to other export routes, but through Turkey's Dardanelles and Bosphorus straits.
Black Sea attacks could disrupt exports, raise global food prices
Russia's main grain exporters group has warned that continued Ukrainian drone attacks on Russian ports and ships in the Black Sea could disrupt grain exports from the region, potentially leading to higher wheat prices and affecting food supplies in Africa and the Middle East.
It is noteworthy that the Egyptian market is the most important importer of grains from the Black Sea region, Russia and Ukraine, especially wheat
Russia, the world's largest exporter of wheat, and Ukraine, another major agricultural exporter, have targeted their respective agricultural export facilities and commercial vessels in the Black Sea in recent weeks.
These attacks have increased concerns about the future of grain shipments from the region and contributed to higher wheat prices.
The Union of Grain Exporters and Producers in Russia said the impact of these attacks could soon spill over to countries that rely on grain supplies from the Black Sea.
"The disruption of shipping in the Black Sea, caused by Ukrainian attacks on dry cargo ships and port infrastructure, poses a direct threat to global food security," the union said in a statement.
The EU reported that grain importers have not seen a shortage so far due to sufficient stocks and the availability of temporary supplies from two other exporters. However, the EU warned that the situation could affect many countries if the unrest continues.
The EU said a Ukrainian drone attack had caused "severe damage" to a key grain export terminal in the Russian port of Taman.
The Russian grain exporters' group said Ukraine's "systematic attacks", which began in July, could eventually lead to a complete closure of export corridors in the Black Sea basin.
The Ukrainian Farmers' Union (UAC), Ukraine's largest farmers' union, also expressed concern about Russian strikes near the southern port of Odesa, saying these attacks limit Ukrainian exports during the crucial harvest season and could affect global grain supplies.
The Russian Defense Ministry announced that its forces targeted 31 ships of the Ukrainian army over the past week, and the ministry explained that the targeted ships include 23 cargo ships and four ships transporting bulk goods.
The Russian Grain Exporters Association said that the reduction in Russian wheat supplies to other countries this season could reach 30-35 million metric tons, accounting for about 15% of global wheat trade.
ASEAN added that other exporting countries would not be able to fully compensate for the lost quantities if this disruption continued.
The association warned that the actual shortage of grain could lead to a protracted global crisis. The group also predicted that wheat prices on board would rise to between $340 and $370 per tonne, with the possibility of surpassing $400 if the current situation continues.
According to the group, countries in the Middle East and Africa are among the most vulnerable due to their heavy dependence on grain supplies from the Black Sea region.
The group warned that higher wheat prices could make it harder for some importing countries to maintain current purchasing levels, which could reduce domestic consumption in poor countries if the situation worsens.It is known that Russia has supplied many African countries with shipments of grain and it constitutes free of charge.
A potential blow to global food supplies.
The deal, brokered by Turkey and the United Nations for the first time after Russia's special military operation against Ukraine in July 2022, sets out measures to ensure the safe export of grain from Ukrainian ports.
According to the agreement, grain ships can sail through a safe passage in the Black Sea, and then pass through the Bosphorus Strait, an important shipping lane in northwestern Turkey, to reach global markets.
The deal proved vital to stabilizing global food prices and providing relief to developing countries that depend on Ukrainian exports. The impact of the war on global food markets has been immediate and painful, especially since Ukraine is a major grain supplier to the World Food Programme.
Kremlin spokesman Dmitry Peskov said: "Unfortunately, the part of the Black Sea agreements related to Russia has not yet been implemented." "Therefore, the agreement has been terminated and as soon as the commitments related to the Russian side are fulfilled, the Russian side will return to implementing this agreement immediately," he continued.
According to the European Commission, Ukraine accounts for 10% of the global wheat market, 15% of the corn market, and 13% of the barley market. It is also a major global player in the sunflower oil market.
The Food and Agriculture Organization (FAO), a United Nations body, warned at the time that as many as 47 million people could be pushed into "acute food insecurity" due to the war.
As of July 18, 2023, 32.9 million tons of grain had been shipped from Ukraine. China was the highest importer of Ukrainian grain with about 8 million tons, followed by Spain with 6 million tons, and Turkey in third place with 3.2 million tons. Egypt was in sixth place globally and first in the Arab world in importing Ukrainian grain with a total of 1.6 million tons.
Shipping companies suspend operations in Ukraine's ports as Russian strikes intensify
Shipping companies have suspended operations in Ukraine's ports as Russian strikes escalate on its Black Sea coast, ship owners and officials said.
Marine data specialist Lloyd's List Intelligence said the escalation in the region, vital to global grain exports, is driving up wheat prices, as increased risks prevent shipowners from working there.
"No ship crossed the Ukrainian sea lane in the Black Sea on July 22, at the height of the harvest season," Ukrainian Foreign Minister Andriy Sebega said, warning that this threatens global food security.
Shipping companies Maersk and Hapag Lloyd announced the suspension of their operations in the Ukrainian port of Chornomorsk, according to AFP.
"Recent missile and drone attacks in the Odesa region have significantly increased operational and security risks," Habag-Lloyd said.
In Ukraine, a major exporter of grains and edible oils, 90% of exports pass through the Black Sea ports in and around Odesa, and Russia and Ukraine together account for about 30% of the global wheat market's supply.
For Ukraine, agricultural exports, which mainly supply markets in Asia, Africa and the Middle East, are one of the few sources of hard currency in the shadow of the war.
What Ukraine did, at the instigation of the NATO countries and NATO, by targeting Russian ships, was an act that was described by economic analysts as reckless without counting the results.
Russia has already responded by targeting Odesa, and has recently intensified its strikes targeting the city's ports, grain and sunflower oil export terminals, as well as commercial ships docked in Ukrainian ports.
Without the slightest thought about the fate of the Ukrainian people's economy, the Uzbek government has become a game in the hands of the NATO and NATO countries, which will eventually lead to an economic crisis not only in Ukraine but in the world in general.
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