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Black Sea Grain Deal Expires After Russia Pulls Off, Impacts Poor Nations

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Russia on Monday quit from a deal safeguarding and ensuring a safe passage of Ukraine’s grain via Black Sea. The deal was meant to facilitate safe passage of grain exports from Ukraine’s ports and was active since last year July. After pulling away from the deal, Russia warned against non-guarantee of the safety of Ukraine’s ships. This the United Nations interpreted as this would “strike a blow to people in need everywhere.”

Meanwhile, Russia also said that fulfilment of its demands like improving exports of its own grain and fertilizer would help in reviving the Black Sea agreement. On its statement, UN Secretary-General Antonio Guterres warned that a deal functioning for a year to facilitate Russia’s shipments was terminated.

In a statement, Russia’s foreign ministry said, “Only upon receipt of concrete results, and not promises and assurances, will Russia be ready to consider restoring the deal.” It further said to the International Maritime Organization (IMO), UN’s shipping arm, that its “guarantees for the safety of navigation” had been revoked and that “proactive necessary actions and response measures to neutralize threats posed by the Kiev regime in the area will be taken.”

On Monday, insurers were debating whether to halt coverage for any ships ready to visit Ukraine.

In response to Russia’s statement, US wheat and maize futures fell after earlier reaching two-week highs. Analysts stated that there is still a chance the grain contract will be extended and that markets were fully aware of the possibility of it expiring.

Russia’s invasion of Ukraine In February 2022 disrupted the exports of grain shipments from Ukraine and Russia itself when it stopped its own grain exports. This led to worldwide food crisis in 2022. To combat the issue, UN supported and Turkey hosted discussions led to signing a deal in Istanbul on 22 July 2022 under which a safe passage of Ukraine’s grain export via Black Sea would be facilitated. The agreement’s initial tenure was of 120 days but it was extended several times rendering the deal active for one year. Turkey controls the maritime routes from the Black Sea, whereas Ukraine and Russia are among the world’s top grain exporters.

Russia argued that the deal was unable to provide a good amount of grain to poor nations. However, the UN rejected its notion and said that the deal still had been beneficial to them as they received food on lower prices which accounted for over 20% lower rates globally.

Replying to Russia’s announcement, Guterres said, “Hundreds of millions of people face hunger and consumers are confronting a global cost-of-living crisis. They will pay the price.” He added that the UN would keep attempting to obtain unrestricted access to international markets for food and fertiliser from Russia and Ukraine.

On the other hand, Ukrainian President Volodymyr Zelenskyy would try to renew Black Sea shipments and Turkish President Tayyip Erdogan has his hopes on Putin whom he thinks might wish to extend the deal and the discussion between them would take place on the matter in August.

Most nations pushed Russia to continue the agreement during a Monday U.N. Security Council meeting on Ukraine. Ukraine has exported about 33 million metric tonnes of maize, wheat, and other commodities as a result of the agreement. On Sunday, the final ship under the agreement departed Ukraine.

A three-year Memorandum of Understanding was reached in July 2022, whereby U.N. representatives pledged to assist Russia in exporting its food and fertiliser to international markets in an effort to persuade it to accept the Black Sea Agreement.

Impact on poor nations

Poorer nations, many of whom are already suffering from inflation, climatic shocks, and conflict, were shaken by Russia’s declaration that it was leaving a deal that allowed Ukrainian grains to leave Black Sea ports.

Following the signing of the agreement, wheat prices in the capital city of Somalia, Mogadishu, which had risen when Russia invaded Ukraine, decreased by 25%. Everyone felt a sense of fear after Moscow’s declaration, including the country’s farmers, bakers, and people who had been affected by the country’s wars and droughts.

According to U.N. trade records, Somalia received 84,000 tonnes of wheat from Ukraine in 2022, up from 31,000 tonnes in 2021 as donors increased aid to stave an approaching famine in some places.

The permanent secretary of Kenya’s foreign affairs ministry, Korir Sing’Oei, predicted additional increases in food prices despite the country currently experiencing the worst drought in decades.

Richer nations can also feel pressure. Due to increased global wheat prices following the conflict, which put financial strain on the government, which supplies subsidized bread for millions of people, the arrangement benefited Egypt, the world’s top wheat importer on average.

Additionally, it led to a rise in unsubsidized bread prices, straining the finances of families who had already experienced years of austerity.

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