One week before the expiration of the Grain Agreement, a four-party agreement between the UN, Turkey, Ukraine, and (separately) russia, on the export of Ukrainian grain, the parties are trying to determine the trade regime that will be in place after July 18.
The topic of the Istanbul Agreement was one of the key issues discussed between Volodymyr Zelensky and President of Turkey Recep Tayyip Erdoğan during their meeting last week on July 7. By that time, the passage rates of ships through the officially designated 'grain corridor' had critically declined, and new contracts for grain exports through Odesa were not being concluded – traders were not even quoting prices.
The Istanbul Agreement, which will celebrate its one-year anniversary on July 22, allowed Ukraine to support its agricultural sector, relieve the market of grain surplus, and achieve export results surpassing the previous marketing year's figures. In total, almost 33 million tonnes of grain were delivered within the framework of the agreement.
Is there a chance for the agreement to be extended, and how will the format of grain exports change if it does not happen? Mind dissected these questions.
What do the parties officially say about the outcomes of the meeting in Turkey? Nothing specific. The position boils down to the repeatedly voiced thesis that the export of Ukrainian grain is critically important for global food security.
At the same time, July 17, the deadline for the agreement according to moscow's version, was also recognised as a Rubicon by the other participants.
"We continue to work on the 'grain corridor.' We are working on its extension after July 17. We want an extension of at least three months. We expect and will make efforts to extend the agreement for two years," Erdoğan stated, adding that poor African countries, in particular, are in urgent need of grain supplies from Ukraine.
For his part, Volodymyr Zelensky stated that the Black Sea should be a zone of security, not so-called frozen conflicts. "It is crucial that we start working with our partners to ensure that the existence of the 'grain corridor' and, consequently, the lives of other people, as President Erdoğan mentioned, on other continents (including Africa and Asia), do not depend on the mood of the russian president when he wakes up," Zelensky added.
On a positive note, Erdoğan stated that during vladimir putin's visit to Turkey in August, he will make efforts to extend the Grain Agreement. Moreover, he intends to negotiate directly for a two-year extension.
What is russia's position? Judging by the public rhetoric of russian propagandists, the kremlin closely monitored the course of Ukrainian-Turkish negotiations with great nervousness. The messages they transmitted to the infosphere as soon as Zelensky's visit to Istanbul became known boiled down to "they want to deceive the Turkish leader and force him to betray russia".
dmitry peskov, the official representative of the kremlin, said that russia would "closely follow the results of these negotiations." "We support our constructive, partnership relations with Ankara and value these relations, feeling reciprocity from the Turkish side," he said, adding that "putin and Erdoğan regularly communicate".
Earlier, the russian foreign ministry stated that everything is heading towards the termination of the Grain Agreement on July 18, as the UN has not fulfilled its obligations. Among russia's demands are the reconnection of the russian agricultural bank to the SWIFT system, the import of spare parts for agricultural machinery to russia, and the pumping of ammonia through the Tolyatti-Odesa pipeline.
In summary, what will happen after July 17? It is almost certain that the 'grain corridor' in its current form will cease to exist. Its relaunch in an updated form with the participation of russia may be possible after the August meeting between putin and Erdoğan.
However, it's not just about the diplomatic skills of the Turkish leader. It is unlikely but not ruled out that in the coming month, European and American regulatory bodies will undergo administrative procedures and make partial concessions to russia. The most realistic option seems to be the reconnection of the russian agricultural bank to SWIFT, while the least likely is the launch of the ammonia pipeline. In addition to the increased risks associated with pumping ammonia through the combat zone, the pipeline itself has been damaged and cannot be operated, according to Rostyslav Shurma, Deputy Head of the Presidential Office of Ukraine.
There is an optimistic version: if russia withdraws from the agreement on July 17, Turkey may announce its own guarantees and begin escorting caravans with its military ships as part of the 'corridor' guarantees. However, this scenario raises many questions at the moment. First and foremost, why would Turkey take such unilateral risks?
What are the agricultural market actors’ views of the situation? Currently, brokers and traders have taken a pause: no contracts are being concluded with the condition of passing through the 'grain corridor'.
Furthermore, even if the Istanbul Agreement is extended in its current form, with artificially delayed inspections, the efficiency of the corridor will be next to nothing. "If they let one ship through a month, no one will go," brokers say.
However, market players consider the prospect of nullifying even these fragile agreements as a major problem. They emphasise that politicians need to strive to preserve this trade channel to the maximum. At the same time, businesses are trying to increase export opportunities through the Danube. Priority steps in this direction include developing the Bystre delta, organising round-the-clock vessel passage through the Romanian Sulina Channel, and conducting transhipment operations in Romanian territorial waters.
This allows Ukrainian Danube ports to double the volume of Ukrainian grain transhipment for export, from 2 million tonnes (the transhipment volume in May 2023) to 4 million tonnes. The Romanian side will also increase its revenues from port fees and relieve its own ports, as grain trucks will not require berthing.
During the meeting of the Danube Cluster, Oleg Tofilat, the Chief Executive Officer of Moldova's railway, announced that the Moldovan side is ready to lower tariffs for the transit of Ukrainian grain through its territory to the level of Ukrainian Railways’ rates. This will help establish and increase the transit of Ukrainian grain via the Moldovan railway, particularly to the Ukrainian port of Reni, and will contribute to the development of the Moldovan port in Giurgiulești.
Can Ukraine export grain from the ports of Greater Odesa without agreements with russia? Theoretically, yes, hoping that russia will not take such a barbaric step as attacking ships with humanitarian cargo. On the other hand, the explosion of the Kakhovka Dam and the mining of the Zaporizhzhia Nuclear Plant leave little hope for the aggressor's prudence.
A decision has now been made to allocate UAH 20 billion of insurance guarantee funds. This money will be used to guarantee compensation for possible damage to the passage of ships in the Black Sea. This measure is needed to replace insurance companies – none of them will insure a ship with such a route.
Is this amount sufficient? It is difficult to average the cost of dry cargo as it depends on tonnage, age, and other parameters. However, a range of $5-30 million can be considered approximate.
Again, in theory, ships under the flag of Turkey could feel relatively safe since it is unlikely that russia would engage in direct military conflict with the most powerful state in the Black Sea. However, firstly, it is unclear why Erdoğan would take on such an additional risk, even with increased earnings from Ukrainian exports. And secondly, relations between moscow and Ankara have clearly cooled after the extradition to Ukraine of the Azov Regiment commanders who were in Turkey.
Volodymyr Zelensky hinted at this option – "an agreement without russia" – by stating that the current 'grain corridor' is not free. "I believe that there should be different corridors," he said.