If the Black Sea grains deal is suspended, dramatic immediate consequences are unlikely to be felt, Dryad global analyst Krisztina Kocsis told Rigzone.
The analyst added, however, that since this is an agreement that aims to maintain a level of cooperation and provide a channel of communication and negotiation between the conflicting parties, its suspension would mean an overall increase in the uncertainty about the operating conditions of the Black Sea and would create a state of commercial volatility.
Kocsis also noted that the suspension “would be detrimental to the entire conflict if this opportunity for negotiation is lost.”
“The immediate effects would be felt in Ukrainian waters while the rest of the Black Sea would continue to operate uninterrupted, albeit against the increased threat of sea mines,” Kocsis said.
The Dryad analyst noted that the agreement expires on March 18 if it is not renewed, and said there are concerns about the renewal “due to Russia’s reluctance.”
“Ukraine is looking to include additional ports around Mikolayiv, which provided 35 percent of its food exports before the invasion,” Kocsis said.
“However, Russia sees the deal as disproportionately favoring Ukraine while failing to serve its original purpose, as only a portion of exported grain goes to poorer nations. Russia is only willing to expand it if supported better their grain and fertilizer exports,” Kocsis added.
If Moscow pulled out of the deal, Ukraine would be deprived of a significant portion of its hard currency earnings, Kocsis said, adding that it would push up global food prices and lead to higher inflation in Europe.
“On the other hand, Russia’s losses would be less dramatic, as declines in its grain exports would not be as significant amid the trade surplus caused by record energy prices,” Kocsis said.
“It is possible that Putin only joined the deal to have additional leverage over the West, as seen last year when he walked out of the deal for four days, causing wheat prices to jump further of five percent and invoke fear in Ukraine and Europe.”, added Kocsis.
“However, it is also becoming obvious that Russian influence is less central to the story than it is trying to project… During the brief suspension, Turkey led the continuation of the agreement and this demonstrated the growing Turkish power in the Black Sea,” Kocsis continued.
The Black Sea Cereals Initiative was launched in Istanbul by the Federation of Russia, Turkey, Ukraine and the United Nations (UN) on July 22, 2022, the UN notes on its website, adding that through of this initiative, a mechanism for security was established. exports of cereals, related food products and fertilizers, including ammonia, from designated Ukrainian ports to world markets. On November 19, 2022, the Black Sea Grain Initiative was extended for 120 days, the UN site shows.
In a March 13 briefing, Stephane Dujarric, the UN secretary-general’s spokesman, said the organization “remains fully committed to the Black Sea Grain Initiative, as well as to our efforts to facilitate the “export of Russian food and fertilizers”.
“The impact of these on reducing world food prices has been clearly demonstrated by the FAO and its regular monthly price index, so we will continue to do everything possible to preserve the integrity of the agreement and ensure – its continuity”, he added. .
From today’s midday briefing: @I remains fully committed to the Black Sea Grain Initiative as well as our efforts to facilitate the export of Russian food and fertilizers. pic.twitter.com/EhNiqLHvlp
— UN Spokesperson (@UN_Spokesperson) March 13, 2023
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