What happens if Russia abandons the Black Sea Grains Agreement? Ship’s crew

By Nigel Hunt and Jonathan Saul

LONDON, April 14 (Reuters) – The Kremlin has said the prospects are ‘not so good’ for an agreement on the 18th UN-backed sea corridor.

The deal has helped tackle a global food crisis made worse by the deadliest war in Europe since World War II, according to UN officials.

It was achieved in July last year, creating a protected transit corridor to allow exports to resume from three ports in Ukraine, a major producer of grains and oilseeds.

Here are some of the problems:

WHAT WAS EXPORTED?

Under the pact to create a safe shipping channel, Ukraine was able to export about 27.7 million tons of agricultural products, including 13.9 million tons of corn and 7.5 million tons of wheat.

This corresponds to about 60% of Ukraine’s corn exports in the current 2022/23 season and 56% of wheat exports.

Other raw materials shipped are rapeseed, sunflower oil, sunflower meal and barley.

The leading destinations were China (6.3 million tonnes), Spain (4.8 million) and Turkey (3 million).

For a full breakdown of exported countries and volumes: UN.org

WHY COULD RUSSIA WITHDRAW FROM THE PACT?

Russia has said there will be no extension unless the West removes obstacles to Russian grain and fertilizer exports, including reconnecting the Russian Agricultural Bank (Rosselkhozbank) to the SWIFT payment system.

Other demands include the resumption of deliveries of agricultural machinery and parts, the lifting of insurance and reinsurance restrictions, the resumption of the Togliatti-Odessa ammonia pipeline and the release of assets and accounts of Russian companies involved in food and fertilizer exports.

There is little evidence that the West agrees to these demands.

CAN THE CORRIDOR WORK WITHOUT RUSSIA?

Ukraine’s ports were closed before the deal was finalized in July last year, and it’s unclear whether it would be possible to ship grain if Russia pulls out.

Already high insurance rates would likely rise, and shipowners might be reluctant to let their ships enter a war zone without Russia’s consent.

Among the risks that insurers would need to consider are the presence of Russian naval vessels in Black Sea waters and floating sea mines.

WILL THE CORRIDOR BE NEEDED IF UKRAINE’S HARVESTS SHRINK?

Ukraine’s grain exports are expected to decline in the 2023/24 season after the end of the war farmers less corn and wheat grown.

However, favorable growth conditions may limit the extent of the decline.

The International Grains Council has forecast Ukraine’s corn harvest to fall to 21 million tons, compared to 27 million last season, with exports expected to fall to 15 million tons from 20.5 million.

Ukraine’s wheat production is expected to fall to 20.2 million tons from 25.2 million in 2022/23 and exports to 11 million versus 14.5 million last season.

Exporting these quantities of grain through the Eastern European Union would be both logistically difficult and expensive, especially for crops grown in the eastern regions of Ukraine, which have a long and difficult journey ahead just to reach the border.

CAN UKRAINE EXPORT MORE GRAIN BY LAND?

Since the start of the conflict, Ukraine has been exporting significant amounts of grain via the eastern EU countries, particularly Hungary, Poland and Romania.

However, there were many logistical challenges, including different track gauges.

The railway network of Ukraine has a gauge of 1,520 mm, in common with other post-Soviet countries. Countries in the Eastern European Union use a track gauge of 1,435mm, making it impossible for trains to run from one network to another without stopping.

Another problem is that the flow of Ukrainian grain through the eastern EU is already causing unrest among farmers in the region, who say it has eroded local supplies and been bought by mills, leaving them with no market for their crops.

Poland last week temporarily blocked imports of Ukrainian grain to mitigate the impact on prices, although it said it would still be allowed to transit the country.

Romanian farmers also blocked traffic and border controls with tractors and trucks.

Ukrainian farmers have dismissed claims that their exports are reducing profitability elsewhere. However, the arguments could be exacerbated if Ukraine had to export a significantly larger volume via Eastern Europe.

HAS THE CORRIDOR REDUCED THE FOOD CRISIS?

Reduced shipments from major exporter Ukraine have played a role in the global food price crisis.

Other factors are climate extremes and the consequences of the COVID-19 pandemic.

Closing the corridor would cause global grain prices to rise, while many countries are already facing sharp increases in food and fuel import costs.

The United Nations World Food Program said food insecurity remains at unprecedented levels this month.

(Reporting by Nigel Hunt and Jonathan Saul; Editing by Barbara Lewis)

(c) Copyright Thomson Reuters 2023.

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