On May 18, the Black Sea Grain Initiative (Initiative on the Safe Transportation of Grain and Foodstuffs from Ukrainian Ports’), signed on July 22, 2022 in Istanbul between Ukraine, Turkey, and the United Nations (UN), was extended until July 18, 2023. According to the initiative, Ukraine obtained the opportunity to export Ukrainian grain and sunflower seeds from three Ukrainian Black Sea ports — namely Odesa, Pivdennyi, and Chornomorsk. At the same time, under this agreement, Russia also got the opportunity to export its agricultural products.
Since the beginning of the grain initiative, according to the UN, 952 ships have been sent from Ukrainian ports in the Black Sea, which transported 30.3 million tons of agricultural commodities to the countries of Africa, Asia, and Europe, including 15.3 million metric tons of corn, 8.3 million metric tons of wheat, and 1.5 million metric tons of sunflower oil.
On the eve of the prolongation of this agreement, Russia actually blocked the movement of ships with Ukrainian grain through the Bosphorus slowing down the inspection of ships for the presence of goods on them, not provided for in the agreement.
Aside from the agreement, Russia wants several concessions to be made. They include the reconnection of the Russian Agricultural Bank to SWIFT; resumption of supplies of agricultural machinery, spare parts, and services; canceling restrictions on insurance and reinsurance; removal of the ban on access to EU ports; resumption of operation of the ammonia pipeline “Tolyatti-Odessa”; unblocking foreign assets and accounts of Russian companies associated with the production and transportation of food and fertilizers.
For its part, Ukraine wants to expand the grain initiative to include the Mykolaiv and Olvia ports in the list of ports from which agricultural products can be exported. Ukraine also wants to expand the range of goods for export including ores and steel products.
Previously, the President of Ukraine, Zelenskyi, stated that the opening of the ammonia pipeline is possible only on the condition of the exchange of prisoners of war by the “all for all” scheme.
However, Ukraine is under a certain pressure from businesses in countries such as Turkey, India, and the U.S., as well from its domestic businesses. For example, there are still six ships under the Turkish flag loaded with grain stuck in the port of Mykolaiv.
The steel producing giant Kryvorizhstal belongs to the Indian tycoon Lakshmi Arcelor Mittal, which is interested in the free export of its products. A number of American producers of ammonia fertilizers are interested in the opening of the Tolyatti-Odesa ammonia pipeline.
It could also mean an increase in haggling between Ukrainian and Russian businesses despite the war.
On the other hand, the opening of the ports of Mykolaiv and Olvia actually means the cessation of military operations to liberate the left-bank part of the Mykolaiv and Kherson regions because the exit from the Dnipro-Bug estuary in the area of the Kinburn Spit on the left bank of the Dnipro River — currently occupied by Russian troops — is only 3.5 km. For safe navigation, a demilitarized zone of at least 30 km must be established on both sides.
Also, the opening of the Tolyatti-Odesa ammonia pipeline means the cessation of hostilities in South-Eastern Ukraine, since the part of the current line of hostilities between the Ukrainian and Russian troops runs along this ammonia pipeline. It also means the introduction of a corresponding demilitarized zone along this stretch of the frontline.
Such assumptions are based on the fact that the negotiations are not led by the ministers of trade, agriculture or economy or their deputies, but by the deputy ministers of defense.
Regardless of the fact that the Black Sea Grain Initiative was prolonged, Russia continues to slow down the movement of vessels in both directions. Whether the grain initiative will be prolonged after July 18 is a big question.
A full restoration of exports from Ukraine will be possible only after the liberation of all territories occupied by Russia, primarily Crimea.
Currently, according to the forecast of the Ministry of Agrarian Policy and Food of Ukraine, this year’s grain harvest may amount to 44.3 million metric tons (53.1 million in 2022). In general, this is 10% less than in 2022 and 40% less than in 2021. In particular, the wheat harvest is expected to be 16.6 million metric tons (20.5 million in 2022). Barley is pegged at 4.8 million metric tons (5.6 million in 2022), and corn at 21.7 million metric tons (25.6 million in 2022).
At the same time, the gross production of oilseeds is expected to increase to 19.2 million tons against 18.2 million tons last year. In particular, the sunflower harvest is projected at 11.5 million metric tons (11.1 million in 2022). Rapeseed is expected to be 3.8 million metric tons (3.7 million in 2022), and soybeans at 3.9 million metric tons (3.4 million in 2022).
According to experts’ forecasts, the export of wheat from Ukraine may amount to 8.8 million metric tons, with corn at 15 million, and sunflower seeds at 1.4 million. Currently, there is an EU ban on the export of wheat, corn, rapeseed, and sunflower seeds from Ukraine to five countries – Bulgaria, Hungary, Poland, Romania, and Slovakia. The ban expires on July 5, but it is possible that the five above mentioned countries may extend this ban unilaterally. So, the prospects of Ukrainian agricultural exports in 2023/2024 is very uncertain.
