By Michelle Nichols
UNITED NATIONS (Reuters) -A pact that has allowed the safe Black Sea export of grain from Ukraine for the past year will expire at the end of Monday after Russia said it will suspend its participation.
The deal, brokered by the United Nations and Turkey last July, aimed to alleviate a global food crisis by allowing Ukrainian grain blocked by the Russia-Ukraine conflict to be exported safely.
Moscow refused to extend the agreement, complaining that promises to free up its own shipments of food and fertilisers had not been kept, but signalled if more steps were taken to help its exports it might consider restoring the deal.
Russia’s Foreign Ministry said the expiry of the pact meant safety guarantees would be withdrawn and the northwestern Black Sea would again be designated an area of temporary danger for shipping.
Insurers on Monday were reviewing whether to freeze cover for any ships willing to sail to Ukraine.
The last ship left Ukraine under the deal on Sunday. Russia’s February 2022 invasion and blockade of Ukraine’s Black Sea ports sent global grain prices soaring. Ukraine and Russia are among the world’s top grain exporters.
Nearly 33 million metric tons of corn, wheat and other grains have been exported by Ukraine under the arrangement.
Russia has formally notified Ukraine, via the Russian embassy in Minsk, that it was suspending its participation in the Black Sea grain deal.
To convince Russia was join the pact, a three-year memorandum of understanding was also struck with the United Nations under which U.N. officials agreed to help Russia with its food and fertiliser exports.
But a statement from Russia’s foreign ministry said none of Moscow’s requirements – including the resumption of ammonia exports through a pipeline leading from Russia to the Ukrainian port of Odesa, and the reconnection of its state agricultural bank Rosselkhozbank to the SWIFT international payments system – had been met.
The foreign ministry said: “Only upon receipt of concrete results, and not promises and assurances, will Russia be ready to consider restoring the deal.”
European Union Commission President Ursula von der Leyen called Russia’s decision to suspend a Black Sea grain export deal a “cynical move”, adding that the EU would continue to work towards ensuring food security for poor countries.
Turkish President Tayyip Erdogan said that he believed Russian President Vladimir Putin wants the continuation of the deal, adding that he will discuss it when they meet in person in August.
Denys Marchuk, deputy head of the Ukrainian Agrarian Council, the main agribusiness organisation in Ukraine, said alternative routes such as river ports were more expensive to use in terms of transportation costs.
However, he expected a solution.
“As an option, why don’t we assess the possibility of the continuation of the grain deal without Russia? We had experience of this already in November 2022,” he added.
The reaction on the grains market was modest, with U.S. wheat futures up about 3% while U.S. corn futures rose nearly 1%.
“I think there is market belief that Russia and the EU have large supplies of wheat which can meet world demand in the coming months, with harvests arriving,” one German trader said.
There was concern, however, that expiry of the pact would add to food inflation at a time when global hunger remains around record levels.
“The global inflation especially on food has eaten up more of our aid than people understand,” Jan Egeland, Secretary General of the Norwegian Refugee Council told Reuters.
“Rations are being cut to children every day now across the world – it is utterly dramatic and this (deal) was one of the few glimmers of hope in this age of Biblical starvation”
A key Russian demand has been for the Russian Agricultural Bank (Rosselkhozbank) to be reconnected to the SWIFT international payments system. The bank was cut off from SWIFT by the European Union in June 2022 over Russia’s invasion.
U.N. Secretary-General Antonio Guterres made a final effort on Tuesday to convince Russian President Vladimir Putin to extend the grain deal for several months in exchange for the EU connecting a subsidiary of Rosselkhozbank to SWIFT for grain and fertilizer transactions, sources said.
(Reporting by Michelle Nichols; additional reporting by Rachel More in Berlin, Micheal Hogan in Hamburg, Emma Farge in Geneva, Bansari Mayur Kamdar in Bangalore, Huseyin Hayatsever and Ali Kucukgocmen in Istanbul, Max Hunder in Kyiv and Reuters bureaux; writing by Nigel Hunt and Nina Chestney; Editing by Will Dunham, William Maclean and David Evans)
