The three in a boat excluding russia: Will Ukraine be able to export grain outside the collapsed Istanbul Agreement? UPDATED
The traffic along the grain corridor has been suspended since 2nd November.
On Wednesday, 2 November, Ukraine, Turkey and the United Nations decided to suspend the "grain corridor" within the Black Sea Grain Initiative, the UN Secretariat at the Joint Coordination Centre reports.
This move is described as "temporary" and forced. Earlier, Turkish President Recep Erdoğan held telephone talks with russian President vladimir putin. Most likely, in order to continue the operation of the corridor, some new form of cooperation should be proposed that could be adjusted to the somewhat russia's vague demand "to demand from Ukraine to guarantee the safety of the water area."
On Tuesday, 1 November, the UN and Turkish inspectors carried out 36 inspections of ships in Ukraine's ports and handed over their reports to russian and Ukrainian delegations.
As a reminder, on 29 October, russia unilaterally withdrew from the Istanbul Agreement, which had opened the possibility for Ukrainian maritime agricultural exports from the ports of Greater Odesa.
The formal reason for the demarche was the attack on military facilities in Sevastopol, allegedly carried out by Ukrainian UAVs. The russian Foreign Ministry reported that the attack was aimed, in particular, at the ships that ensure the functioning of the grain humanitarian corridor, and thus the safety of civilian dry cargo ships cannot be guaranteed. The Istanbul Agreement has been de jure suspended since Saturday and for an indefinite period. Representatives of the russian delegation at the Coordination Centre in Istanbul have already received relevant notifications. There were 20 days left until its formal expiration on 19 November.
The vessels that at the time of the russian demarche were halfway to their destination – at the commission in Istanbul, which were more than 150 vessels – will most likely get the opportunity to complete the route. Although no one can predict the timing of the control now.
What are the positions of officials? The office of the UN Secretary-General, one of the parties to the agreement, reported that they are in contact with Russia on this issue. "It is vital that all parties refrain from any actions that could threaten the Black Sea Grain Initiative," said Deputy Spokesman of the UN Secretary-General Farhan Haq.
They also assessed the effectiveness of the Agreement: the reduction in the cost of basic foodstuffs, which became possible due to the agreements on the export of food and fertilisers by the Black Sea, according to UN estimates, helped to save about 100 million people from extreme poverty.
The Ukrainian side named what is happening a "blackmail". Ukrainian Foreign Minister Dmytro Kuleba called on all states to demand that Russia "stop the hunger games"
How unexpected was this "turn"? Despite the strong reaction of officials, few believed that the "grain corridor" would be continued without problems. The russian side directly said that they were disappointed with the practical results of the agreement concluded on 22 July in Istanbul.
It is also clear that active exports of Ukrainian grain – and, accordingly, the stability of the Ukrainian economy – were not part of their plans, because the actual results of the Agreement turned out to be much better than predicted. As of 20 October, 363 vessels with 8.1 million tonnes of food left the three Ukrainian ports embraced by the Istanbul Agreement. "I would not like to jump ahead, but to be honest, I would not bet much on the continuation of this agreement in the situation in which we find ourselves," said Dmitry Poliansky, Deputy Permanent Representative of russia to the United Nations, shortly before the current events.
How can the situation develop further?
There are three main scenarios:
1. The parties enter into new negotiations, during which the Russian side receives large preferences, namely in terms of fertilisers and its own grain, as provided for in the additional agreement between russia and the UN.
The most obvious and plausible option, but not the easiest. Buyers are afraid to deal with russian goods that are not even formally under sanctions – compliance of Western companies treats such transactions as high-risk.
Read also: The countdown: What will change in the "grain corridor" format when/if it is extended
2. Military operation in the Black Sea resulting in russia losing its combat potential and will cease to pose a threat to humanitarian and any other caravans.
The scenario belongs to the category of utopian, at least because the main arbiter of the grain agreement, Turkey, seeks to maintain a balance of interests of all parties. And NATO leadership has repeatedly stressed that the Alliance will not be the first to enter into confrontation.
3. Grain exports from Ukraine by sea remain blocked for a long time, negotiations are conducted "for show" and delayed as much as possible. Arguments about the famine in Africa now face the counterargument of russian propaganda that Ukrainian grain goes to rich countries.
In addition, taking into account the near record harvest, according to the head of the Ministry of Agriculture Dmitry Patrushev, the russian side can supply the poorest countries with up to 500,000 tonnes of grain free of charge in the next four months. In general, after six months of declining food prices, the issue has lost its acuteness.
Even in the worst case scenario – a prolonged shutdown of sea exports – Ukraine will continue to export grain by rail and by the Danube. Without the sea, our country is able to transship 3–3.5 million tonnes per month by all alternative routes. Before the war, this figure was 6–7 million tonnes per month and almost 70 million tonnes per season.
The cost of such land logistics significantly exceeds the sea one. The cost of grain delivery from Western Ukraine to the port in Romania is 130-150$/tonne, from the North – for example, from Chernigiv Oblast – 200$/tonne. At the cost of grain 200$/tonne and the selling price of 320$/tonne in the port of Constanta, including logistics, the net loss per ton will be several tens of dollars.
Also, the lack of clear prospects for sales of the future harvest threatens the 2023 spring sowing season.
Read also: War agrarian season: Ukraine can harvest a little more than half of last year's harvest, while the rest of the world is suffering drought
Reference. The grain deal was signed on July 22 in Istanbul between Ukraine, the UN, Turkey and russia (russia and Ukraine did not have direct interaction). The parties reached an agreement on safe navigation for the export of grain, fertilisers and other products from Odesa, Chornomorsk and Pivdenny the seaports for 120 days with the possibility of extension.
Since then, Ukraine has exported more than 8 million tonnes of grain, including 3.9 million tonnes to Europe, 1 million tonnes to Africa and 3.2 million tonnes to Asia. In general, the geography of Ukrainian war overseas exports covers 38 countries.
As of July, 20 million tonnes of transitional stocks were formed in Ukraine, with the average annual level not exceeding 5-6 million tonnes.
The forecast for the new harvest of grains and oilseeds in 2022 averages 70 million tonnes, which, together with domestic consumption at 20 million tonnes, forms 50 million export potential. Without the sea, its implementation will last for a year and a half.
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