Three new ships will be admitted to the Black Sea Grains Treaty after a contract extension with Russia

Three new ships were approved on Thursday to take part in a deal allowing safe Black Sea exports of Ukrainian grain, the United Nations said, as global wheat prices plummeted a day after Russia agreed to extend the deal for another 60 days kept falling.

Russia had threatened to pull out of the Black Sea Agreement if a list of demands to overcome obstacles to its own grain and fertilizer exports was not met by May 18. The Kremlin said Thursday it extended the deal because some outcomes of the talks led to it. “There were certain hopes”, but further progress had to be made.

The United Nations and Turkey negotiated the deal last July 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.

The deal stalled on Wednesday after the last approved ship left a Ukrainian port.

Officials from Russia, Ukraine, Turkey and the United Nations are forming a Joint Coordination Center (JCC) in Istanbul to implement the pact. They authorize and inspect ships. No new ships have been admitted since May 4, for which Ukraine blamed Russia.

The JCC on Thursday authorized three new ships to sail to Ukraine’s ports of Odessa and Chornomorsk, UN Deputy Spokesman Farhan Haq said. A third port – Pivdennyi (Yuzhny) – also falls under the Black Sea Agreement.

“While we welcome this partial resumption of inbound transportation activities, we call on the parties to ensure new vessel approvals for all three ports to utilize capacity and meet industry needs,” Haq told reporters .

FURTHER TALKS

UN Secretary-General Antonio Guterres said on Wednesday he hopes a comprehensive agreement to improve, expand and extend the Black Sea Export Agreement can now be reached.

Haq said there could be a meeting of officials from Ukraine, Russia, Turkey and the United Nations on Friday or early next week, but the extent of representation is still being discussed.

“Ultimately, it’s great news that the Black Sea Grains Agreement has been renewed and the worst-case scenario of cancellation is avoided,” said Paul Joules, commodities analyst at Rabobank.

“Given that Russia has repeatedly expressed dissatisfaction with the deal, the extension came as a surprise to the market and, as a result, wheat futures fell sharply following the announcement.”

Wheat prices on the Chicago Board of Trade fell nearly 2% to a two-week low of $6.25-1/2 a bushel on Thursday after falling more than 3% on Wednesday.

Kremlin spokesman Dmitry Peskov on Thursday called the extension “a qualified result” for Russia and said various scenarios were being worked out to ease restrictions on Russia’s state-owned agricultural bank, a key Moscow demand.

At the same time, in July, to persuade Russia to allow grain exports from the Black Sea, the United Nations agreed to support Moscow with its own agricultural supplies for three years.

While Russian food and fertilizer exports are not subject to Western sanctions imposed after the February 2022 invasion of Ukraine, Moscow said restrictions on payments, logistics and insurance posed a barrier to supplies.

The US has dismissed Russia’s complaints.

The challenge of transporting grain across Ukraine during the war was highlighted Thursday by the suspension of rail services between Simferopol, capital of the Crimean peninsula, and Sevastopol after a freight train carrying grain derailed. The derailment was caused by “interference from outsiders,” the Crimean Railways said in a statement.

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