A wartime deal that unblocked grain shipments from Ukraine and helped mitigate rising global food prices will be extended by four months, the United Nations said on Thursday.
The deal extension aims to prevent a price shock in some of the world’s most vulnerable countries, where many are struggling with hunger.
Ukrainian President Volodymyr Zelenskyy called the 120-day extension a “key decision in the global fight against the food crisis”.
The deal, signed during Russia’s war in Ukraine, establishes a safe maritime corridor in the Black Sea and inspection procedures to address fears that merchant ships may be carrying weapons or launching attacks.
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Russian Defense Minister Sergei Shoigu and Ukrainian Infrastructure Minister Oleksandr Kubrakov signed separate agreements with UN Secretary-General Antonio Guterres and Turkish Defense Minister Hulusi Akar. The ceremony was attended by Turkish President Recep Tayyip Erdogan.
“Today there is a lighthouse on the Black Sea,” Guterres said. “A beacon of hope, a beacon of possibility, a beacon of relief in a world that needs it more than ever.”
A gang unloads grain at a granary in the village of Zghurivka, Ukraine, Aug. 9, 2022.
(AP Photo/Efrem Lukatsky, Files)
Although Western sanctions against Russia for its invasion of Ukraine did not concern food exports, many shipping and insurance companies were reluctant to deal with Moscow, either by refusing to do so or by dramatically raising the price.
The United Nations has been working to overcome problems related to insurance, port access, financial transactions and navigation for Russian ships, according to a United Nations official who was not authorized to speak publicly and spoke on the condition of anonymity. The official said the insurance matter was mostly resolved in the past few days.
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Ukraine and Russia are major global suppliers of wheat, barley, sunflower oil and other foods to countries in Africa, the Middle East and parts of Asia where millions of poor people don’t have enough to eat.
Russia was also the world’s leading exporter of fertilizers before the war. The loss of those supplies following Russia’s invasion of Ukraine on 24 February had pushed up global food prices and fueled concerns about a food crisis in poorer countries.
While the extension prevents a price shock in developing nations that spend far more on food and energy than richer countries, threats of drought in places like Somalia and weakening currencies around the world persist. which makes it more expensive to buy imported grain.
“I welcome the agreement of all parties to continue the Black Sea grain initiative to facilitate the safe navigation of Ukraine’s grain, food and fertilizer exports,” Guterres said in a statement.
The Turkish defense ministry said the decision to extend the deal came after two days of talks in Istanbul between delegations from Turkey, Russia, Ukraine and the UN which took place in a “positive and constructive” atmosphere.
Cargo ships anchored in the Sea of Marmara wait to pass through the Bosphorus strait in Istanbul, Turkey on Tuesday, November 1, 2022.
(AP Photo/Khalil Hamra)
Russia had expressed dissatisfaction with the deal that eases exports of Russian grain and fertilizers, suggesting it may not approve an extension and even briefly suspend its side of the deal late last month. He cited the risks to his ships following what he claimed was a Ukrainian drone strike on Russia’s Black Sea Fleet.
Guterres also said the United Nations was “fully committed to removing remaining barriers to the export of food and fertilizers from (Russia)” – a part of the deal Moscow sees as crucial.
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Russia has offered to donate 260,000 tonnes of fertilizer stored in European ports to farmers in developing countries who have been locked out of the fertilizer market due to shortages, and the official said the first vessel is expected to leave the Netherlands Monday to Mozambique, where the fertilizer will go overland to Malawi. Further shipments are expected from Belgium and Estonia, the official said.
Russia’s foreign ministry said Moscow had allowed the extension to take effect “without any changes in terms and scope”. He said Russia had noted the “intensification” of UN efforts to speed up Russian exports.
“All these problems must be resolved within 120 days for which the ‘package’ is extended,” the ministry said.
A ship under the Kerch Bridge blocks the passage to the Kerch Strait near Kerch, Crimea, on Sunday November 25, 2018.
(AP Photo)
During the extension talks, the sides discussed possible additional measures to “deliver more grain to those who really need it,” the ministry added, ostensibly in response to Russian complaints that most of the grain ended up in more rich.
Turkish President Recep Tayyip Erdogan suggested on Thursday that grain from Russia could be processed into flour in Turkey and shipped to needy African nations.
UN humanitarian chief Martin Griffiths said last month that 23 percent of Ukraine’s exports under the grain deal went to low- and middle-income countries and 49 percent of all grain shipments went to went to such nations.
Markets have been pleasantly surprised by the extension, said Ian Mitchell, co-director of the Europe program at the Center for Global Development, who specializes in agriculture and food security. Wheat futures prices fell 2.6% in Chicago following the announcement.
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“Ukraine and Russia are such major grain exporters that the rest of the market cannot fully replace the complete absence of Ukrainian grain,” he said. “So that deal will matter significantly to food prices, even if the volumes aren’t what they were before the invasion.”
However, he said uncertainty is “useless in this deal”. Towards the end of the four-month extension, markets “will price in the risk that it hasn’t been extended and prices will rally again a bit.”
Arnaud Petit, executive director of the International Grains Council, said the Black Sea region produces some of the world’s cheapest grains and securing those supplies prevents a price shock to developing nations.
A security officer stands alongside the Navi-Star vessel, filled with grain since the Russian invasion of Ukraine began five months ago, as it waits to sail from the Odessa Seaport, Odessa, Ukraine, on Friday, July 29 2022.
(AP Photo/David Goldman)
There have been good harvests in the region, contributing about 10 million tonnes more grain worldwide than last year, he said. The extension means that Ukrainian farmers can plan to plant.
Petit called the extension a building block in “an unstable region where things can change on a daily basis.”
However, when it comes to food prices, the trade movement isn’t nearly as important as the weakening of currencies around the world against a strong US dollar, which is the price of commodities like wheat and other grains, Petit said.
The council calculated that for Ghana, which mainly imports its wheat from Canada, the dollar price of wheat from Canada has remained broadly stable for two years. But changing to local currency resulted in a 70% price increase.
Global food prices are down about 15% from their March peak following the adoption of the grain initiative in July.
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“With over 11 million tonnes of grain and foodstuffs delivered to those in need via some 500 vessels over the past four months, the significance and benefits of this agreement for the world’s food supply and security have become clear.” Turkey said. Erdoğan said.
The Associated Press contributed to this post.
