EU proposes a Russian grain bank Ship’s crew

by Jahnavi Nidumolu (Reuters) The European Union is considering a proposal for the Russian Agricultural Bank to set up a subsidiary to reconnect to the global financial network as a lull in Moscow, the Financial Times said on Monday.

With the bank under sanctions, the move is aimed at securing the Black Sea Grains Agreement, which allows Ukraine to export food to global markets, the newspaper said.

The European Commission did not comment, while the Kremlin replied to a question about the report on Monday that it did nothing to announce about the implementation of the deal.

The United Nations and Turkey last July negotiated the Black Sea Grain Initiative for an initial 120 days to help address a global food crisis exacerbated by Moscow’s invasion of Ukraine, one of the world’s top grain exporters. It has since been renewed three times, but expires later this month.

Under the agreement, Ukraine has exported more than 32 million tons, mainly corn and wheat.

Moscow reiterated on Monday that it was pessimistic about the prospects for an extension of the deal, as no progress had been made in implementing accompanying agreements affecting Russian exports.

There was little immediate reaction in global grain markets on Monday as Wv1 wheat prices were little changed.

“The market is generally convinced that the Ukrainian supply contract will not be renewed unless Russia makes significant concessions,” said a European grain trader.

“Easing banking sanctions would be a quick way to give Russia something,” the trader said, adding that many doubts remain about whether the deal will be renewed.

Russia last week called that it saw no reason to extend the grain deal because the West had been “outrageous” about the deal, despite assuring poor countries that Russian grain exports would continue.

Moscow’s plan, proposed during UN-brokered talks, would allow the banking entity to process payments related to grain exports, the newspaper said, citing unnamed sources.

The new entity is expected to use the global financial messaging system SWIFT, which was blocked for Russia’s largest banks following the Russian invasion of Ukraine, it said.

Responding to the Financial Times report, the special envoy of Ukraine’s foreign ministry, Olha Trofimtseva, said the EU wants to “make grain trade easier somehow”.

“On the one hand, the opportunities for agricultural exports are good. On the other hand, making a concession to an extortionist means encouraging them to continue the extortion,” she wrote on the messaging app Telegram.

“It’s a well-known axiom: A blackmailer doesn’t stop when you meet his demands. He simply makes new demands.”

As two of the world’s top agricultural producers, Russia and Ukraine are major players in grain and oilseed markets, ranging from wheat and barley to rapeseed and sunflower oil. Russia is also dominant on the fertilizer market.

In addition to restoring SWIFT access, Russia is also aiming to resume deliveries of agricultural machinery and parts, as well as lifting restrictions on insurance and reinsurance.

(Reporting by Jahnavi Nidumolu in Bengaluru, additional reporting by Pavel Polityuk in Kiev, Michael Hogan in Hamburg and Gabriela Baczynska in Brussels and Nigel Hunt in London; Editing by Kim Coghill, Clarence Fernandez, David Goodman and David Evans)

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