Russia is reportedly unlikely to extend the Black Sea Grain Initiative, following negotiations in May to extend the deal past July 18th, which is the current deadline for all parties to either extend or collapse the deal. The Black Sea Grain Initiative was initially brokered by the United Nations and Turkey between Russia and Ukraine in an attempt to mitigate the global food crisis catalyzed by the Russian invasion of Ukraine. This deal also guaranteed the safe passage of food exports departing from Ukrainian ports.
Ukrainian officials cite a new ammonia terminal in Russia's Taman Peninsula, which is expected to be completed by the end of 2023 and is anticipated to replace the Russia-Odesa pipeline that has been inactive since 2022. This development has led Ukrainian officials to believe that Russia will force the collapse of the Black Sea Grain Initiative because Russia will no longer need Ukraine's ports to export ammonia, upon the opening of its new ammonia terminal.
The Russian government claims financial sanctions are impeding exporters' ability to receive payment for their goods. However, the Ukraine-coalition economies, such as those mentioned previously, have not sanctioned food nor most fertilizer exports following the invasion of Ukraine. The USDA Foreign Agricultural Service predicts that Russian wheat exports may exceed 45 million tons in the 2022-2023 reporting year, which is a dramatic increase of 36% since the previous year. These increases in production can be attributed to favorable weather conditions, increased planting area for most crops, and better funding for agricultural producers.
This report also points out that the very trade barriers Russia alleges to face, comes directly from the Russian government itself. "Export volumes could be even larger, but the Russian government continues to apply export taxes and quotas, trade-restricting measures that are self-imposed," per the report.
Russian fertilizer also saw increased exports in 2022; One source reports that Russia urea exports rose 12% in 2022 while phosphate-based fertilizers, diammonium and monoammonium phosphate rose 9%. The only Russian export that saw decreases was the potassium-based fertilizer muriate of potash, and this decrease can be attributed to the fall of a pipeline connecting Russia to the Ukrainian port of Pivdennyi on the Black Sea, which remains closed.
The collapse of this deal could lead to devastating consequences worldwide. Several Sub-Saharan African and Middle Eastern nations are highly reliant on Ukrainian grain imports for their food security and source more than 90% of their wheat imports from the Black Sea region.
"Keeping as many pathways open for moving grain is critical," the U.S. Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs Alexis Taylor said. "Russia continues to really weaponize food in this war and really impacts some of our most vulnerable on the planet."
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