Russia warned on Wednesday it would consider any ship sailing around Ukrainian ports a military target, days after Moscow pulled out of a year-long deal that had allowed Kiev to export its grain across the Black Sea despite a wartime blockade.
Russia’s moves have profound implications for exports of Ukraine’s grain, a commodity vital to its own economy and world grain markets.
Here’s a look at alternative options for Ukraine to export its grain:
What is the immediate impact of Russia’s warning?
Russia’s Defense Ministry issued a warning to ship operators and other countries on Wednesday, suggesting that any attempt to circumvent the blockade could be seen as an act of war. Global grain prices rose sharply after the announcement, but remained below prices when Russia launched its full-scale invasion of Ukraine in February 2022. Prices appeared to stabilize on Thursday.
One reason prices did not rise further is that Ukraine’s grain exports under the Black Sea Grain Initiative had already slowed to a trickle in the days before Russia pulled out of the deal on Monday, according to Sal Gilbertie, head of Teucrium, a US-based investment consultancy.
How have Russia’s attacks on Ukrainian ports affected the situation?
Since Monday’s announcement, Russia has launched a series of nightly airstrikes against Ukrainian ports, killing and wounding civilians. On Wednesday, an attack in Chornomorsk, just south of Odessa, also destroyed 60,000 tons of grain waiting to be loaded onto ships. That is enough to feed more than 270,000 people for a year, according to the World Food Programme.
The airstrikes seemed to reinforce Russia’s decision to end the deal and its refusal to allow Ukrainian exports through the Black Sea. They’re also raising the stakes on how potential talks about reviving the deal might pan out.
Can Ukraine continue to export food across the Black Sea despite the threat from Russia?
Ukraine’s President Volodymyr Zelensky on Monday spoke of striking an agreement with Turkey and the United Nations, which helped broker the deal, to continue grain exports independently of Moscow. There has been no official response from either side to the idea. However, Wednesday’s Russian warning would likely deter commercial shipping companies and raise the price of any shipping insurance policy, which would in turn make Ukrainian grain more expensive on the international market.
What does it mean for shipping?
Prospects of a resumption now depend on military, diplomatic and commercial factors.
Six countries have coastlines on the Black Sea and it is an important conduit for Russian grain exports. Ukraine warned on Thursday that it would view Russian ships bound for Russian ports or ports in occupied Ukraine as “carrying military cargo, with all the associated risks”. It was too early to say what impact this would have on Russian exports.
Can the deal be revived?
Russia has said that from its perspective, the deal has been terminated rather than shelved, making the prospect of a quick resurgence less likely. In April, Moscow made a series of demands it wanted to meet in exchange for extending the grain deal, including reconnecting its agricultural bank to the SWIFT payment system to make it easier to market its own grain, which it also ships across the Black Sea.
António Guterres, the Secretary-General of the United Nations, had made proposals to meet some of Russia’s demands, but Moscow nevertheless backed down. He has expressed disappointment with Russia’s decision, which he says would harm people around the world facing food insecurity.
Turkey and China are big buyers of Ukrainian grain and could pressure Russia’s President Vladimir V. Putin to accept a renegotiated deal, two analysts said. Leaders of both countries have remained on good terms with Putin since the beginning of the invasion. Putin is also expected to visit Turkey next month, where he will hold talks with President Recep Tayyip Erdogan, a broker in the grain deal signed last year.
What are Ukraine’s alternatives?
Ukraine can transport its grain by road and rail to neighboring European countries, including Poland, and via barges on the River Danube to other Ukrainian ports in Izmail and Reni, as well as the Romanian port of Constanta. These routes have enough capacity to export all of the country’s grain, according to Benoît Fayaud, deputy director of Strategie Grains, an agricultural economics research firm.
However, exports via these routes are more expensive and as a result Ukrainian grain, which is currently among the cheapest in the world, would become less competitive, said World Food Program chief economist Arif Husain. To keep prices low, the amount paid to Ukrainian farmers would have to be reduced, which would negatively affect future agricultural investment, he said.
“This deal with the Black Sea was a life saver for Ukrainian farmers,” he said.
Are road and rail routes still viable?
Last summer, the European Union took steps to clear the way for Ukraine’s grain exports by land, given Russia’s blockade of the Black Sea. However, following protests from farmers in some EU countries, the bloc allowed Bulgaria, Hungary, Poland, Romania and Slovakia to ban domestic sales of Ukrainian wheat, maize, rapeseed and sunflower seeds, though they still allowed the transit of those items for export elsewhere. The ban is expected to expire on September 15.
Ministers of those five countries on Wednesday called on the bloc to extend the bans.
“From the perspective of the agricultural sector, the war in Ukraine has had an increasingly serious impact on the agricultural market,” Polish Prime Minister Mateusz Morawiecki told reporters. “Such factors should be eliminated or changed. That is why we closed the borders to products from Ukraine when they flooded and destabilized the agricultural market.”
Monica Proncuk reporting contributed.
