The important grain agreement at stake: – The stakes must be calculated as high

The agreement that guarantees the export of grain from Ukraine to the rest of the world expires tomorrow. Now Russia is making tough demands in order to agree to renew the agreement.

– The risk should be calculated as high based on what they are saying now. If Russia didn’t fulfill its wishes, it wouldn’t have renewed the agreement in the first place, says Christian Smedhag at AgriAnalyse for VG.

This is the background:

• After Russia invaded Ukraine in February 2022, Russian naval ships blockaded Ukraine’s ports and seized about 20 million tons of grain.
• This had dire consequences for the food supply of many developing countries. United nations warned against A global food crisis that could last for years.
• When the grain agreement was signed on July 22 of that year, UN Secretary-General António Guterres described it like Of critical importance, and a ‘beacon of hope’, in a world in dire need of it.

The grain export agreement expires tomorrow, Monday, July 17th.

Russia pointed out That it will not extend it this time, unless Russian banks have access to the global Swift system, which provides international transfers, and from which Russian banks have been banned since the war.

Movement signs

Just under two weeks ago, Turkish President Erdogan held a meeting with Ukrainian President Zelensky about, among other things, the grain agreement.

According to the Turkish president, Russian President Putin is scheduled to come to Istanbul next month, his first visit to a NATO country since the invasion.

Turkey has made it clear several times that it wants to play a mediating role in the war between Russia and Ukraine. Erdogan said on Friday evening that he hoped to extend the grain deal.

Tom Rosth, principal lecturer in intelligence at the Norwegian Defense Academy, says this could be a sign that there may be some movement in the grain negotiations.

– It seems that Erdogan is ready to offer diplomatic gains that can soften the love of the Russians. There are a few other NATO countries who might consider inviting Putin — and that might help convince him, he says.

Tough requirements

At the same time, he calls the Russians “extremely stubborn.”

– The Russians said they see no point in renewing the grain agreement. They want bigger gains, and they think Ukraine is bolstering the gains it makes by being allowed to export grain.

It also describes the risks of not extending the agreement as high:

– The danger is greater now – unless one gives in to part of Russia’s tough demands to undermine the sanctions regime, or gets a diplomatic dividend, he says.

Here are the negotiations now

Røseth and Smedhaug Smedhaug say the Russians’ demands of the Swift system are absolutely essential to further operation now.

Swift connects more than 11,000 banks, financial institutions and other companies around the world. The system helps banks send money to each other across national borders. Russian banks have been denied entry since the beginning of the war.

– The main part is that they want to bring the Agricultural Bank of Russia into the Swift payment system, so that it becomes easier for them to buy and sell, says Smedhough.

Røseth notes that the UN has reached a compromise to use a Western bank or financial institution.

– This is not enough for Moscow. In addition, the Russian side is trying to gain additional gains by allowing ammonia exportsammonia exportsAmmonia is a chemical compound of nitrogen and hydrogen, which is used as a fertilizer. and other commodities related to grain production.

Both highlight a request to reopen an ammonia pipeline that runs from Togliatti in Russia to Odessa in Ukraine.

– The ammonia pipeline that runs through Ukraine to the Black Sea has been blown up. It was Russia’s desire to be active and export ammonia. Therefore, they lose interest in continuing the agreement. The rhetoric lately, Roseth says, is that they no longer want the agreement because it is not due.

This can happen if it is not extended

If the agreement is not extended, Rosth says, the Russians will blame the West for its unwillingness to go further.

– There is a communication problem for Russia: the agreement benefits food security and poor countries in the world. They are trying as much as possible to spread a narrative that most of it goes to Western countries, but the truth is that the agreement contributes to improving global food security, and a large part goes to poor countries.

– If this agreement is not implemented, will it affect Africa, which is already suffering from drought?

– Yes. With a drought, countries in Africa will be in dire need of imports, and when one of the world’s granaries cannot be exported, it raises concerns about food safety. Prices will also rise significantly.

At the same time, Smedchough says, the market doesn’t seem particularly fearful.

– The supply situation looks relatively good, so the main challenge is Ukrainian agriculture, which suffers from poor profitability, and neighboring countries, which are facing difficulties due to the large influx of grain from Ukraine. It will also intensify supply challenges in North Africa and the Middle East, but there appear to be usable crops in other countries.

He says the heat wave has not yet yielded downwardly revised production estimates for world cereals, and that the challenge may be greater for vegetables and fruits.

– But of course this increases the uncertainty.