Black Sea Grain Deal Expires This Week

If the Black Sea Grain Deal was suspended, it is unlikely that there would be dramatic immediate consequences to be felt, Dryad Global Analyst Krisztina Kocsis told Rigzone.

The analyst added, however, that, since this is an agreement aiming to maintain a level of cooperation and provide a channel for communication and negotiation between warring parties, its suspension would mean an overall increase in uncertainty around the operating conditions of the Black Sea and it would create a state of commercial volatility.

Kocsis also noted that the suspension “would be harmful for the entire conflict if this opportunity for negotiation was lost”.

“The immediate effects would be felt on Ukrainian waters while the rest of the Black Sea would continue to operate uninterrupted, albeit against heightened threat of sea mines,” Kocsis said.

The Dryad analyst highlighted that the deal expires on March 18 if not renewed and said there are concerns about renewal “due to Russia’s reluctance”.

“Ukraine seeks to include additional ports around Mikolayiv, which provided 35 percent of its food exports before the invasion,” Kocsis said.

“However, Russia views the deal to disproportionately favour Ukraine while it does not fulfil its original purpose as only a fraction of the exported grain goes to the poorest nations. Russia is only willing to extend it if its own grain and fertilizer exports are supported better,” Kocsis added.

If Moscow were to withdraw from the deal, Ukraine would be deprived of a significant part of its hard-currency revenue, Kocsis said, adding that it would cause global food prices to surge and would trigger further inflation in Europe.

“On the other hand, Russia’s losses would be less dramatic as fallout from its grain exports would not be that significant amidst the trade surplus caused by record-high energy prices,” Kocsis stated.

“It is possible that Putin only joined the deal to have additional leverage over the West, as it was seen last year when it abandoned the deal for four days, causing wheat prices to jump more than five percent and invoke fear in Ukraine and in Europe,” Kocsis added.

“However, it is also becoming obvious that Russian influence is less central in the story than it tries to project … During the short suspension, Turkey spearheaded the continuation of the deal and this demonstrated growing Turkish power on the Black Sea,” Kocsis continued.

The Black Sea Grain Initiative was launched in Istanbul by the Russian Federation, Türkiye, Ukraine and United Nations (UN) on July 22, 2022, the UN notes on its website, adding that, through this initiative, a mechanism was established for the safe exports of grain, related foodstuffs and fertilizer, including ammonia, from designated Ukrainian ports to global markets. On November 19, 2022, the Black Sea Grain Initiative was extended for 120 days, the UN site shows.

In a briefing on March 13, Stephane Dujarric, the spokesman for the secretary general of the UN, said the organization “remains totally committed to the Black Sea Grain Initiative, as well as our efforts to facilitate the export of Russian food and fertilizer”.

“The impact of these in lowering global food prices has been clearly shown by the FAO and their regular monthly price index, and this is why we will go on doing everything possible to preserve the integrity of the agreement and ensure its continuity,” he added.

From today's noon briefing: @UN remains totally committed to the Black Sea Grain Initiative, as well as our efforts to facilitate the export of Russian food and fertilizer. pic.twitter.com/EhNiqLHvlp

— UN Spokesperson (@UN_Spokesperson) March 13, 2023

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