Russia and Ukraine Sign Agreement to Release 20 mn tons of Grain Stuck in Ukraine’s Black Sea Ports

The Grain Deal

Russia and Ukraine today signed an agreement to release some 20 million tons of grain stuck in Ukraine’s Black Sea ports. If the deal holds, it could alleviate the global food crisis and bring down soaring grain prices.

The agreement is the first that Russia and Ukraine have publicly signed since the war started, but it moves them no closer to peace, my colleague Matina Stevis-Gridneff writes. The deal was brokered by the U.N. and Turkey after months of negotiations.

Given the realities on the ground and the lack of trust, getting the two sides to stick to the deal could be a challenge, and the risks that it could unravel are high, analysts and officials warned. U.S. and Ukrainian officials expressed skepticism that Russia would follow through on its commitments.

Ukraine and Russia together supply more than a quarter of the world’s wheat, and Russia is also a major supplier of fertilizer. Ukraine is also a leading exporter of barley, corn and sunflower.

When Russia invaded, Ukraine mined its ports to prevent an assault from the sea. Those mines, along with Russia’s blockade, prevented Ukraine from safely resuming its exports and trapped its grain.

How the deal will work

The first shipments out of Odesa and the neighboring ports of Chornomorsk and Yuzhne are expected within weeks, U.N. officials said.

Ukrainian captains will steer ships with grain out of the ports through safe passages mapped by the Ukrainian Navy to avoid mines.

As a naval expert told us recently, clearing the mines Ukraine laid would be a long and difficult task.

The ships loaded with grain will be given safe passage to Turkish ports to be unloaded and, when returning to Ukraine, will be inspected to ensure that they aren’t carrying weapons — a key Russian demand.

Teams from Russia, Ukraine, Turkey and the U.N. will jointly carry out the checks, and a joint command center will be set up in Istanbul to monitor the operation.

The agreement covers an initial 120 days, but it could be renewed on a rolling basis.

The deal will not immediately solve the global food crisis.

Before the war, the pandemic, droughts in North America and the Horn of Africa and poor harvests in China and France were squeezing global food supplies.

By December, global wheat prices had risen about 80 percent in a little over a year, according to the International Monetary Fund. At the same time, the war incited a jump in oil and gas prices, which led to an even sharper increase in the cost of fertilizers.

The flow of wheat to Somalia could be increased within weeks, averting a full-blown famine, officials say. The agreement is particularly important in 14 African nations that depend on the two warring nations for half of their wheat imports. One country, Eritrea, is fully dependent on them.

The deal should also lead to a gradual decline in global grain prices, but grain markets are not expected to return to normal immediately. The price of wheat fell 5.9 percent after the announcement, to $7.59 per bushel — the lowest close since February.

What’s in it for Ukraine

With its economy decimated by the war, Ukraine will receive income from the grain shipments.

Once the ships start moving, some five million tons of grains are expected to be shipped out each month. At that rate, the stockpiles of nearly 20 million tons should be cleared within three to four months.

This will free up storage facilities for the new harvest already underway in Ukraine. Without the storage, the harvest would rot.

What’s in it for Russia

Russia should find it easier to sell its grain and fertilizer on the world market.

While Western sanctions did not cover these goods, shipping companies, insurers, banks and other businesses have been reluctant to help Russia export them, fearing they could be in violation of sanctions.

The U.S. and the E.U. have given assurances that banks and companies involved in the grain trade were not banned under sanctions.

Possible pitfalls

Any breach in the implementation or disagreements could quickly escalate and scupper the deal.

Since there is no formal cease-fire agreement, the ships will be sailing through a war zone, and attacks near them or the ports could also sink the agreement.

Russia and Ukraine have agreed that the ships involved and the port facilities used for their operations will not be attacked. But a senior U.N. official said that Russia’s security guarantees did not extend to parts of Ukrainian ports not used directly for grain exports