Russia suspends Black Sea Grain Initiative amid ongoing conflict

Russia declined Monday to extend a UN-supervised deal allowing Ukraine to ship corn, wheat, barley, and other agricultural products to global markets.

The Black Sea Grain Initiative officially expired on Sunday. Still, Russia didn’t announce the suspension of its cooperation until Monday, following a Ukrainian military strike on the Russian bridge connecting Crimea to the Russian mainland.

The Ukrainian attack on Crimean Bridge was the second major strike on the crossing since the war began last February. It killed two Russian civilians, prompting the authorities to label it a “terrorist attack.”

Ukraine said the strike was perfectly legal under the laws of war, as it had targeted a vital military supply route.

Russia built Crimean Bridge after forcibly annexing Crimea in 2014. The massive structure cost four billion dollars and connects Russia to the peninsula by road and rail. It is also a major symbol of Russia’s commitment to retaining Crimea.

Ukraine, however, says it will not stop fighting until Crimea is back in its hands.

Russia's revenge strikes against Odesa

In what Russia called a “mass revenge strike,” missiles struck the Ukrainian towns of Odesa and Mykolaiv early Tuesday. The strikes continued overnight into Wednesday, with additional attacks on warehouses and port facilities in Odesa and Chornomorsk.

Ukrainian officials said the missiles destroyed 60,000 tons of grain and damaged vital port infrastructure. Odesa, Chornomorsk, and a third port, Yuzhny, were all source points for Ukrainian grain shipments under the Black Sea deal. 

The Black Sea Grain Initiative was signed in July 2022 by Russia and Ukraine, with Turkish and UN mediation, to alleviate global grain shortages that had led to spiraling prices.

By Wednesday morning, US corn and wheat futures had risen 7% and 4% compared to the beginning of the week. Still, both commodities remain substantially cheaper than they were at the peak of the grain crisis last year.

Experts say prices may rise dramatically if the agreement is not renewed.

Russia said it would reconsider extending the Black Sea deal if the international community lifts banking sanctions on its own agricultural exports. Among other measures, Moscow is demanding restoration of international SWIFT banking privileges for its exports of food and fertilizer.

Although international sanctions have cut SWIFT links to Russia, they do allow the export of agricultural products. The UN and Western diplomats say Russia can and does sell grain and fertilizer without SWIFT. Russia disagrees, saying the international banking system is vital to its exports.

The UN secretary general, António Guterres, said Monday he had sent a letter to Russia last week, proposing to renew the SWIFT mechanism for a subsidiary of the Russian Agricultural Bank. 

Turkish President Recep Tayyip Erdoğan, who helped broker the Black Sea Grain Initiative last summer, said Monday he planned to soon speak with Russia’s president, Vladimir Putin, and that Russia would likely return to the deal.

The Black Sea Grain Initiative allowed ships to sail from three Ukrainian ports to a fourth in Turkey, where UN, Russian, and Ukrainian inspectors ensured the vessels were not carrying disallowed goods and passengers. From there, the ships took their grain to global markets.

The UN said roughly 33 million metric tons of grain were transported this way since July 2022, half of which went to countries in the developing world, including those receiving support from the World Food Program. Russia and Ukraine are the first and fifth largest global grain exporters.

The Black Sea Initiative was necessary because Russian naval forces patrol the Black Sea, effectively blockading the Ukrainian coast. Although the Ukrainian Navy retains fighting capabilities, it is no match for the Russian fleet.

The fighting has hit Ukrainian eastern and southern areas hard, but vast areas in the country’s interior continue to produce grain. Earnings from those exports are vital to the struggling Ukrainian economy.

Although Ukraine’s allies support the grain deal, its agricultural successes have caused unease among its East European neighbors.

A 2023 bumper crop has led to a spike in Ukrainian grain shipments to Poland, Hungary, Romania, and Bulgaria, all complaining that the increase undermines domestic producers.

By contrast, Ukrainian grain is particularly appreciated in Spain and the Netherlands, where it feeds livestock.

The biggest recipients of Ukrainian grain under the Black Sea Initiative have been China (24% of Ukraine exports), Spain (18%), Turkey (10%), Italy (6%), and the Netherlands (6%).

Some 44% of the grain overall has gone to countries the World Bank classifies as high-income, while 37% has gone to upper-middle-income countries. This leaves less than 20% to countries in the lower middle-income and low-income categories.

Still, the International Rescue Committee, a US-based aid agency, said the grain deal was a “lifeline for the 79 countries and 349 million people on the front line of food insecurity.”