The Black Sea Grain Initiative: Another whammy to the global economy?

With just a few days to go, the United Nations is scrambling to extend an agreement that allows Ukrainian grain to be shipped via the Black Sea to parts of the world struggling with hunger, helping ease a global food crisis exacerbated by the Ukraine war more than a year ago.
A breakthrough initiative that the UN and Türkiye brokered with the warring parties last July, known as the Black Sea Grain Initiative (BSGI), came with a separate agreement to facilitate the delivery of Russian food and fertiliser that Moscow insists has not been given the same zeal that the signatories of the initiative applied with regards to Ukrainian grain.
UN officials and analysts have consistently warned that failure to extend the BSGI could hurt countries in Africa, the Middle East and parts of Asia that depend on Ukrainian wheat, barley, vegetable oil and other affordable food products, especially when drought has become a common occurrence recently.
The initiative helped lower the price of food commodities like wheat over the past year, but that relief has not yet reached the kitchen table, according to many analysts.
The failure to extend the grain initiative beyond July 17 is just one more thing the world doesn’t need, as prices could start heading higher.
Many analysts think the grain initiative should be extended for a longer period of time and expanded to give predictability and confidence to markets.
But on July 4, the Russian Foreign Ministry issued a statement in which it said it sees “no grounds” to prolong the Ukrainian grain initiative past its July 17 deadline.
The agreement has failed to meet its original goals of steering grain towards poor nations, the ministry claimed. Instead, it has become a “purely commercial” scheme that ships produce to wealthy countries, while Russian food and fertiliser exports remain blocked.
The ministry claimed with the grain initiative set to expire, the collective West, Ukraine and even the UN itself have ramped up their “propaganda activities” on the matter.
The arguments boil down to claims that without Ukrainian fodder corn, the world will die of starvation, while the illegal unilateral sanctions imposed by the West against Russia do not apply to food and fertilisers,” it noted.
In reality, the grain initiative has become a “purely commercial” mechanism to export Ukrainian produce to “well-fed” countries instead of those experiencing food insecurity, the ministry continued.

Some 81% of produce shipped from Ukraine under the initiative in the past year ended up in countries with “high and upper middle income levels,” it said, adding that the world’s poorest countries, including Ethiopia, Yemen, Afghanistan, Sudan and Somalia, accounted for only 2.6%.
Meanwhile, the situation regarding blocked Russian food and fertiliser exports “continues to degrade,” the ministry noted. The five “system” goals envisioned by the Russia-UN memorandum remain unmet.
They include allowing Russia’s major agricultural lender, Rosslekhozbank, back onto the SWIFT payments system, enabling deliveries of spare parts for agriculture machinery, the resumption of the Tolyatti-Odessa ammonia pipeline’s operation, sorting out insurance and logistics, as well as “unfreezing” Russian assets.
The first three goals are effectively “no longer on the agenda anymore,” while no tangible progress has been shown on the other two, the ministry said.
Against such a backdrop, Moscow sees“no grounds” to prolong the grain initiative, the statement concluded.
Originally signed on July 22, 2022 and intended to last three months, the initiative was prolonged numerous times over the past year, despite growing concerns repeatedly voiced by Moscow over its failure to provide any benefits for Russia.
Russian Foreign Minister Sergey Lavrov reiterated that Moscow sees no grounds to agree to an extension of the grain initiative, insisting that promises made to Russia remain unfulfilled.
He accused the US and EU of adopting an “outrageous” attitude by claiming that their sanctions do not explicitly target Russian agricultural shipments.
The diplomat argued the restrictions applied to Rosselkhozbank, Russia’s shipping industry, and “a host of other allegedly technical but actually prohibitive actions” have created major obstacles to Russian exports.
“I don’t see what arguments there are for those who would like to continue this Black Sea initiative,” Lavrov stated.
The Ukraine war that started in February 2022 led to a complete halt of maritime grain shipments from Ukraine, previously a major exporter via the Black Sea.
In addition Russia itself temporarily halted its grain exports, further exacerbating the situation. This resulted in a rise in world food prices and the threat of famine in lower-income countries.
To address the issue, discussions began in April last year, hosted by Türkiye, which controls the maritime routes from the Black Sea, and supported by the UN.
The resulting agreement was signed in Istanbul on 22 July 2022, valid for a period of 120 days. The July agreement created procedures to safely export grain from certain ports in an attempt to address the 2022 food crisis.

A joint coordination and inspection centre was set up in Türkiye, with the UN serving as the secretariat.
The original agreement was set to expire on November 19. Russia suspended its participation in the agreement for several days due to a drone attack on Russian naval ships elsewhere in the Black Sea, but rejoined following mediation.
On November 17, the UN and Ukraine announced the agreement had been extended for a further 120 days.
In March 2023, Türkiye and the UN announced that they secured a second extension for at least another 60 days. In May 2023, the initiative was once again extended for 60 days, expiring on July 17.
By mid-May 2023, more than 950 voyages had successfully left Ukrainian ports carrying over 30 million tonnes of grain and other food products to more than 40 different countries.
In the summer of 2023, Russia has repeatedly claimed it will withdraw from the BSGI in July 2023 unless its demands are met. And this time, it looks really REAL that Russia is intending to do just that.

The Black Sea Grain Initiative (BSGI) between the two warring states brokered by the UN and Türkiye which was first signed on July 22 last year had two agreements.
The first was to allow the export of Ukrainian grain blocked by the Ukraine war, while the second was on the export of Russian food and fertilisers despite Western sanctions imposed on Moscow following the Ukraine war.
The first BSGI for 120 days expired on Nov 19 and was due to roll over unless there were objections.
In fact, upon its expiry, the UN is seeking to renew it for one year. Moscow, however, has not yet said whether it will agree to that.
But three weeks before its expiry, Moscow had pulled out of the deal, saying it could not guarantee the safety of civilian ships crossing the Black Sea because of a drone attack on its fleet there.
Four days later on Nov 2, following a phone call between Russian President Vladmir Putin and Turkish President Recep Tayyip Erdogan and consultations between their defence ministers, Russia ended its four days of non-cooperation with the initiative.
In a statement, Russia’s defence ministry said that, with the help of the UN and Türkiye, it had obtained sufficient written guarantees from Ukraine that it would not use the secure shipping corridor or its designated Ukrainian ports for strikes against Russia.
Putin affirmed the receipt of those commitments, and said that if Russia withdrew once more because of Ukrainian breaches, it would substitute the entire volume of grain destined for the “poorest countries” for free from its own stocks.
But in a nod to Türkiye’s influence, as well as what he called its “neutrality” in Russia’s conflict with Ukraine, he added: “In any case, we will not in the future impede deliveries of grain from Ukrainian territory to the Turkish Republic.”
Russia has also complained that the second agreement in the initiative exempting its fertilisers from sanctions was not being respected.
The UN then called on all actors to expedite the removal of any remaining impediments to the export and transportation of fertilisers to countries most in need.
The UN also managed to unblock a shipment of 20,000 tons of Russian fertiliser in the Netherlands, stuck in the Dutch port of Rotterdam due to EU-imposed sanctions on certain individuals and goods.

And so the BSGI was renewed for the first time for another 120 days till March 18.
On March 18, the UN and Erdogan announced the extension of the BSGI for a second time, but neither confirmed how long it would last.
The UN, Türkiye and Ukraine had pushed for 120 days, while Russia said it was willing to agree to 60 days.
Ukrainian Deputy Prime Minister Oleksandr Kubrakov tweeted the initiative would remain in effect for the longer, four-month period.
But Russian Foreign Ministry spokeswoman Maria Zakharova told Russian news agency Tass that Moscow “agreed to extend the Initiative for 60 days.”
“Any claim that it’s prolonged for more than 60 days is either wishful thinking or deliberate manipulation,” Russia’s deputy ambassador to the UN, Dmitry Polyansky, has said then.
In this second extension, Russia and not Ukraine was in the right that the initiative would be renewed for 60 days until May 18.
Russia has again complained that a separate agreement with the UN to overcome obstacles to shipments of its fertilisers that was part of the July package has not produced results.
Russia’s UN Ambassador Vassily Nebenzia told the UN Security Council that the UN has to recognise it has “no leverage to exempt Russian agricultural export operations from Western sanctions,” and therefore Russia would only extend the initiative until May 18.
“If Brussels, Washington and London are genuinely interested to continue the export of food from Ukraine through the maritime humanitarian corridor, then they have two months to exempt from their sanctions the entire chain of operations which accompany the Russian agricultural sector,” Nebenzia said.
“Otherwise, we fail to understand how the package concept of the secretary-general of the UN will work through these simple agreements.”
Stéphane Dujarric, the spokesman for UN Secretary-General Antonio Guterres, said in a statement 25 million metric tonnes (about 28 millions tons) of grain and foodstuffs had moved to 45 countries under the initiative, helping to bring down global food prices and stabilising markets.
“We remain strongly committed to both agreements, and we urge all sides to redouble their efforts to implement them fully,” Dujarric said.

The war in Ukraine sent food prices surging to record highs in 2022 and helped contribute to a global food crisis also tied to the lingering effects of the COVID-19 pandemic and climate factors like drought.
The disruption in shipments of grain needed for staples of diets in places like Egypt, Lebanon and Nigeria exacerbated economic challenges and helped push millions more people into poverty or food insecurity.
People in developing countries spend more of their money on basics like food. The crisis left an estimated 345 million people facing food insecurity, according to the UN’s World Food Programme.
In all extensions of the initiative, Erdogan played a pivotal role via phone diplomacy with Putin to convince the Russian leader to continue Russia’s participation in the initiative, which is a testament to his mastery of diplomacy skills, not to mention of his growing close relationship with Putin.
When the first extension was made, Erdogan reportedly said: “He [Putin] doesn’t agree to open this grain corridor through others. But with me, when I call … straight away he opened the grain corridor,” Erdogan said.
Erdogan’s skill in diplomacy was once again up in the air for everyone to see when in March, Moscow agreed to extend the Black Sea pact for only a further 60 days until May 18 instead of 120 days unless a list of demands regarding its own agricultural exports was met.
As May 18 approaches, the world was on its nerve to see whether Russia will extend the initiative beyond May 18.
Again, it was Erdogan who stepped in with a phone diplomacy with Putin, and announced on May 17 the BSGI has been extended for two more months, until July 17.
We are now in the same predicament as in May when days before the initiative is to expire on July 17, Russia has already said it sees “no grounds” to prolong the Ukrainian grain initiative past its July 17 deadline.
Can Erdogan work on his magic again by putting his diplomacy skill to the test?
In your editor’s opinion, this time round it would be a tough call for Ergodan to do so after succeeding for three times in convincing Putin to agree to a renewal.
In the first place his diplomacy skill seems to be “compromised” from the Russian perspective when Erdogan decided to release five previously imprisoned Azov battalion commanders on July 8 to Ukrainian President Volodymyr Zelensky in his recent trip to Türkiye.
Russia then accused Ankara of walking back an agreement to keep them until the war’s end.

Kremlin spokesperson Dmitry Peskov said Türkiye was supposed to keep the prisoners in the country, according to an agreement forged among Russia, Ukraine, and Türkiye.
Peskov’s comments came after Erdogan announced Türkiye would host Russian President Vladimir Putin to discuss the BSGI.
“No one informed us about this,” Peskov said. “According to the agreements, these ringleaders were to remain on the territory of Türkiye until the end of the conflict.”
Russian forces captured hundreds of Ukrainian fighters during the three-month bloody battle in Mariupol before troops surrendered in May 2022.
Many of these troops who held the line by hiding in bunkers and tunnels under the Azovstal steel plant were Azov battalion members.
A prisoner swap organised with the help of Türkiye and Saudi Arabia in September allowed hundreds of Ukrainian and Russian soldiers to return home.
Zelenskyy announced part of the agreement included that five commanders of the Azov battalion who led the charge in Mariupol would remain in Türkiye until the war concluded.
Zelenskyy did not share what conditions changed that allowed him to take the commanders home.
As for the other Azov soldiers captured in Mariupol, 22 are currently facing trial in Russia after the country designated the battalion as a terrorist group.
Meanwhile Russian Senator Viktor Bondarev who is also a member of the Federation Council, the upper chamber of the Russian parliament, and chair of the body’s defence and security committee said Türkiye’s latest statements and actions show that it is sliding towards the group of nations that Moscow considers unfriendly.
Speaking to TASS news agency on July 10, Bondarev suggested Erdogan is caving to pressure from the West.
He cited Ankara’s stated support for Ukraine’s bid to join Nato and the subsequent decision to release from custody five commanders of the notorious Azov regiment as moves that have undermined Turkish neutrality.
“Certainly, national security and national interest have the priority. But even under serious Western pressure one should preserve their face, as Hungarian leader Viktor Orban demonstrated repeatedly,” the senator said.
He also has harsh words for Erdogan when he accused him of stabbing Russia in the back, and described the handover of Azov commanders as one in a series of “stupid and impulsive decisions” by Erdogan.
In releasing the Azov commanders to Zelensky, the Turkish president may have been partially reacting to the deterioration of the Black Sea grain initiative, the senator said.

Global food prices have been falling since mid-2022 owing to several factors, including the resumption of exports from Ukrainian ports under the Black Sea Grain Initiative (BSGI).
The Food and Agriculture Organisation’s Food Price Index declined by 19.7% year-on-year in April 2023 to 127.2%.
Data analyst Trading Economics reports that in the European Union (EU), although food inflation has gone down, yet it is still in the double digit – 15.04% in May compared to 16.41% in the previous month.
In the bigger economies of the EU, France and Germany for instance, food inflation is at 13.6% and 13.4% respectively in June compared to 14.3% and 14.5% in May.
In the Eastern European countries, for the same month of May, Poland scored a 18.9% food inflation compared to 19.7% in the previous month, Czech Republic (14.5% compared to 17.3% previously), Bulgaria (14.38% compared to 15.85% previously) and Romania (18.73% compared to 19.84% previously).
In the Baltic countries, Estonia scored a 19.5% food inflation in June compared to 20.4% in the previous month, while for the same month, Latvia (14.4% compared to 17.9% previously) and Lithuania (14.4% compared to 18.2% previously).
In the UK, inflation currently stands at 8.7% in May, unchanged from April but food prices have gone up much more than that. Grocery inflation hit a high of 18.3% in May (19% in April) – adding more than £800 to the typical annual family food bill.
And their nemesis – Russia – has a food inflation rate of 0.2% (very low) in June compared to -1% in May.
For comparison, let’s take a look at the food inflation rate for some Asean countries. Brunei and Cambodia have a food inflation rate of 2.8% and 2.26% respectively in April, while Malaysia and Singapore each has a rate of 5.9% and 6.8% respectively in May, and Indonesia, 2.85% in June.
Only two Asean countries have a double digit food inflation – Laos (42.73%) and Myanmar (18.43%).
For those countries with double digit food inflation, it is not clear when food prices will start to come down as there are multiple factors that will need to stabilise before prices can reduce.
Most analysts opine the war in Ukraine needs to come to an end and then a period of stabilisation on all the other costs facing food businesses needs to take place before any meaningful reductions in food inflation start occurring.

According to these analysts, there are a lot of complex reasons food prices have been going up since last year.
Rising labour, energy, and transport costs are major contributors to the increases, as well as the war in Ukraine and production difficulties caused by severe weather conditions.
The war in Ukraine has impacted commodities like wheat, grain and vegetable oils, while broader supply chain issues since the pandemic have also contributed.
And then there’s the cost of energy to manufacture food products. Salary rises due to inflation have also not helped keep food costs down.
It is the small businesses that produce and sell food which are feeling the pinch – many can only survive by putting up prices.
In going through all the data in Trading Economics, your editor notices some interesting patterns.
In the first place there seem to be a general downward trend in food inflation in almost all countries starting from the middle of last year when the BSGI was introduced in July 2022, hot on the heels of a peak in food prices for months after the Ukraine war began in Feb last year.
Now just imagine if Russia withdraws from the BSGI when it expires on July 17; the downward trend in food inflation that the world is enjoying now will definitely be reversed, sparking a global food crisis again!
Also this downward trend in food prices is very marginal in the EU countries such that even after the fall in food prices there, food inflation remains at double digit rates in the EU countries, unlike the one digit figure experienced by almost all Asean countries with the exception of Laos and Myanmar.
Why would the EU countries’ food inflation mirror that of poorer countries like Ethiopia, Sierra Leone, Senegal and Haiti, in term of being in double digit?
Could it be that it is the unilateral shock and awe sanction that the EU imposed on Russia has boomeranged on all EU countries such that their food inflation are in double digit whereas Russia’s food inflation is very low at 0.2%?
And almost all Asian countries including Asean, majority of whom do not support the EU sanction on Russia, have a one digit food inflation rate.
Isn’t this a strong enough reason for the EU countries not to put obstacles in the Russian exports of its food and fertilisers by acceding to the Russian request of lifting sanction on their agricultural exports so that it will continue to participate in the BSGI?
Also, taking into account the Ukraine war needs to end for a period of stabilisation on all the other costs facing food businesses to take place before we can see any meaningful reductions in food inflation, isn’t it time for the EU, majority of whose members are also in Nato to put pressure on the US to end the war by cajoling Ukraine to enter into negotiation with Russia?
After all, the world has already suffered enough from this war, and it needs to be stopped.

Read more on the Black Sea Grain Initiative (BSGI), Russian view of seeing no grounds to prolong the BSGI, Erdogan’s pivotal role in all BSGI’s extensions and food inflation:

Black Sea Grain Initiative Joint Coordination Centre

The Black Sea Grain Initiative: What it is, and why it’s important for the world

Grain deal does not work, how can it be extended — Lavrov

Renewing grain deal not in Russia’s interests, expert says

Russia’s top diplomat Lavrov sees no reason to extend Black Sea grain deal

Quitting grain deal will not affect Russia’s agricultural exports – Lavrov

UN aid chief to Russia: Don’t ‘chuck away’ Black Sea grain deal

What happens if Russia blocks the Ukraine grain deal?

A crucial deal aimed at averting a global food crisis has been extended. Here’s everything you need to know

Putin: We could quit grain deal again, but would not block grain for Turkey

As Russia’s war in Ukraine drags on, Turkey’s role expands

Russia said it was blindsided by Turkey after Zelenskyy left the country with formerly imprisoned Azov battalion members

Russia, Ukraine announce major surprise prisoner swap

Türkiye turning into ‘unfriendly country’ – Russian senator

Kremlin tells Türkiye to wise up about EU

The impact of inflation on food

Consumer price inflation, UK: May 2023

Food Inflation

By the beginning of 2023, the 12-year Syrian war saw the Idlib province near the border with Türkiye as the last stronghold of the anti-Assad Islamist opposition in north-western Syria.

With the US being too fixated with the Ukraine war and containing China, its focus on the Middle East keeps shrinking.

With a rather substantial military presence and operational capabilities in the region, Washington is now less and less willing to get involved in regional issues.

Perhaps this is due to the failure of its massive shock and awe sanctions on Russia which has boomeranged massively on its own economy, which experts are predicting will undergo a recession soon.

Other reason could be due to the “demilitarisation” of its armed forces where with the exception of nuclear weapons, the US has more than sufficient weapons and ammunitions to only defend itself because all of its surplus weapons and ammunitions have gone to Ukraine to be destroyed by Russia.

And to make matter worse, its military-industrial complex (MIC) is undergoing a sort of “de-industrialisation”, where it could no longer produced weapons and ammunitions as fast as the Pentagon wants it, forcing it to appeal to South Korea and Japan for assistance in a speedy delivery of ammunition shells to Ukraine.

This ironically is brought about by globalisation, which was spurred by the US but has resulted in the offshoring of the supply chains for its MIC to mostly China and India.

The idea of onshoring of its supply chains back to the US is now gaining traction and momentum but this will take time.

With ISIS decimated, the US and its western allies neutralised, the opposition reconciled with the Assad government, all that is left for a lasting peace in Syria is a meeting between Turkish President Tayyip Recep Erdogan and Syrian President Bashar al-Assad.

There are big challenges for this meeting to take place. While Erdogan has been looking forward to the meeting, Assad has laid down a pre-condition.

According to Assad, the meeting with Erdogan is possible only “when Türkiye is clearly and unambiguously ready, without any uncertainties or caveats, for a full withdrawal [of the Turkish military] from Syria, for putting an end to the support of terrorists and getting back to the status quo that had existed prior to the commencement of hostilities in Syria.”

But Ankara has its own priorities and logic, and this pertains to, among other things, resolving the Kurdish issue and defining the status of the Kurdish armed detachments which are viewed by Türkiye as terrorists; the return of Syrian refugees to their homes; and the political process, reforms and reconciliation with the opposition.

Overcoming these points of discord is a complicated process. Ankara will not withdraw its armed forces from Syria without guarantees on its priority issues, primarily on the solution of the Kurdish problem.

As for the return of Syrian refugees from Türkiye (about 3.5 million people), despite this being agreed by both Moscow and Damascus, they are not ready for the mass-scale return of Syrians to their homes for several serious reasons.

In the first place, the difficult socio-economic situation in Syria implies in the short term, the Syrian government does not have the appropriate infrastructure and sufficient economic resources to accommodate large numbers of returning refugees.

Moreover, the cost of supporting and reintegrating millions of refugees would place an unsustainable burden on Syria’s weak economy and could lead to its collapse.

To make things even worse, in the run-up to the May elections in Türkiye, Syria is aware that progress in the Syrian-Turkish normalisation can help Erdogan score extra points. That is probably why Assad is in no hurry to meet with Erdogan.

This is where Assad lacks a broader picture. Syria and Türkiye are neighbours, so they must learn to live and let live.

Taking into account it is the US alone that does not welcome the rapprochement between Syria and Türkiye, and its scheming with its European allies to ensure a regime change via the electoral process in Türkiye, Assad should have built political capital with Türkiye by helping Erdogan to win the election via having a summit with him before the election.

But of course, this is now a moot point because despite Assad’s cold shoulder on the meeting with Erdogan before the election, and in spite of the US scheming for a regime change in Türkiye, Erdogan on his own has already won the election.

So does this mean as predicted by western analysts it’s now Erdogan’s turn to give Assad the cold shoulder and proceed with Turkish incursion into Syria, as planned earlier?

The answer is no because not only Erdogan but the whole of Türkiye including its opposition want a rapprochement with Syria.

And even if Erdogan insists on his earlier plan for an incursion into Syria, Russia won’t allow it. It is Russia which controls the airspace over northern Syria and not the US.

So where do we go from here?

While waiting for Assad to “come down to earth” to agree on a summit with Erdogan, a return to an ‘unimpeded’ economic and trade relationship between Türkiye and Syria, as advocated by Russian Foreign Minister Sergey Lavrov should be implemented with immediate effect.

This would help Syria in the recovery of its economy that had been devastated by the war, and afford it with the wherewithal to welcome back Syrian refugees not only from Turkiye but in the region to their homes.

Countries as far away as Europe would also gain in the form of less Syrian refugees coming to their shores.

Türkiye will also benefit from this because the Turkish people too is suffering heavily economically due to an economy devastated by high inflation rates.

If this ‘unimpeded’ economic and trade relationship between Türkiye and Syria is hampered by the US sanction, then just ignore it.

Türkiye has already shown this is possible when it currently ignores US and EU-sanctions on Russia in the Ukraine war.

The fact is it is only incumbent on all countries to observe UN-mandated sanctions, not US or EU-mandated ones.

Rich Gulf brother countries should also lend their hands to help intensify trading and economic cooperation with Türkiye and Syria.

In fact, Russia, China, India, Brazil and South Africa can also help by bringing Syria and Türkiye into the ambit of the BRICS nations and the Shanghai Cooperation Organisation in line with their idea of a multipolar world.

Then at a suitable time, this should be followed with the political dimension of the crisis by using the existing platform of rapprochement of the quadrilateral ministerial meeting of Türkiye, Syria, Iran and Russia to thrash out whatever differences Türkiye and Syria have, and manage it judiciously.

In this regard, the Syrian Democratic Forces (SDF) and the Kurdistan Workers’ Party (PKK) should be contented respectively with the autonomy granted by Syria in the north of the country, and by Türkiye in the area of the country where they form the majority.

They should also stop their double dealings of at times siding with Syria to fight Türkiye or siding with the US to fight both Syria and Türkiye.

Instead they should always play the role of a peacemaker between Syria and Türkiye. The same goes for the Syrian opposition Islamist factions supported by Türkiye.

The fact is whether it is Türkiye, Syria, PKK, SDF or the opposition Islamist factions, they are all bound together by being the adherents of Islam, and they are all supposed to be the peacemakers of the world, as Islam means peace.

Where else to begin to play this role if not to start it from their own “homes” and neighbourhood by being peacemakers among their warring brothers, and among themselves.

Regards,

Jamari Mohtar

Editor, Let’s Talk!

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