European Union and United Nations officials are discussing creating a new unit within a sanctioned Russian bank in a bid to salvage Ukraine’s grain export deal.
(Bloomberg) — European Union and United Nations officials are discussing creating a new unit within a sanctioned Russian bank in a bid to salvage Ukraine’s grain export deal.
A new entity of Russian Agricultural Bank — which was cut off from the SWIFT international payments system following the invasion of Ukraine — would be allowed to undertake transactions related to grain trading, according to people familiar with the talks. The Kremlin has been pushing to reconnect the bank to the network as a condition of renewing the Black Sea deal that offers a safe corridor for Ukraine grain shipments.
EU leaders were briefed on the option at a summit in Brussels last Thursday, the people said, asking not to be identified as the matter is private. The EU is reticent to reconnect the bank outright, given its close ties to Russian President Vladimir Putin, and fears the lender could be used for transactions that go beyond agriculture.
State-owned Rosselkhozbank JSC, also known as Russian Agricultural Bank, didn’t immediately respond to a request for comment.
Ukraine’s grain exports are vital to the country’s economy, but are also key to taming global food inflation. The fragile deal — brokered by the UN and Turkey a year ago — expires in mid-July after several extensions. Cargo inspections have been frequently disrupted by Moscow and no new vessels have been allowed to join the initiative since June 26.
The legal and technical feasibility of isolating specific grain-related transactions is unclear, the people said. Officials are also skeptical that Moscow’s demand is merely another attempt to scupper the pact, they said. The Financial Times reported the talks earlier on Monday.
Russia, which competes with Ukraine in the global grain market, has repeatedly threatened to pull out of the deal, complaining that its own farm sector has been impacted by Western sanctions. Russia’s agricultural products aren’t directly sanctioned, but restrictions on banks have caused financial and logistical issues for some grain importers.
Read More: Russia Is Tightening its Grip on the World’s Wheat Supply
Still, with another large wheat harvest beginning, Russia is expected to ship record volumes for a second year in a row. By contrast, Ukraine will see its share of global exports halve from pre-invasion levels as production suffers long-term damage from mined fields and broken logistics chains.
–With assistance from Áine Quinn.
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