Why Grain Deal is Causing Stir and What Russia Stands to Gain From Unblocking Ukrainian Ports

Why Grain Deal is Causing Stir and What Russia Stands to Gain From Unblocking Ukrainian Ports

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The so called grain deal is the main intrigue of this week. Ukraine, Russia, Turkey and the UN may agree to unblock grain exports from Ukrainian ports, as reported by Reuters. “We're hurrying as fast as we can.” The source asked not to be identified.

Of course, various unnamed officials can hardly be called a trustworthy source, but the emergence of such news once again confirms what a powerful request for the grain deal there is from the U.S., since American publications are already forming the necessary background for this agreement.

Not the way White House Imagines

US President Joe Biden reiterated over the weekend how important the grain deal was to the United States during his visit to Saudi Arabia and talks with King Salman. The bilateral communiqué included Ukraine and Ukrainian grain as a separate item.

“The leaders reaffirmed their commitment to provide critical assistance to the Ukrainian people and to ensure unimpeded grain and wheat exports to alleviate a global food crisis that threatens to dramatically affect several Middle Eastern and African states,” says a White House communiqué, published on the White House website www.whitehouse.gov.

In fact, the discussion of the grain deal poped up in the world information space thanks to U.S. President Joe Biden, who in May told the whole world that millions of tons of grain were blocked in Ukrainian ports. Biden even named the exact figure, about 20 million tons. In this regard, the U.S. president called for the export of Ukrainian grain, because grain was needed to save Americans from rising food prices.

The proposal is all the more popular and sensible, as top politicians and top officials around the world are trumpeting the threat of a terrible famine.

In June, Biden brought up the topic of Ukrainian grain again, saying Washington was working on a plan to get it out of Ukrainian ports by rail through Poland.

“Thousands of tons of grain, which is in granaries, ready for export. We are working on a plan to deliver it to other countries by rail,” the U.S. president said. He underlined that the traditional sea route for food exports from Ukraine is blocked.

What is the bottom line? In reality, it didn't happen like it was supposed to, and the topic of unblocking Ukrainian ports was brought up again.

In an interview in early June, Vladimir Putin poked fun at the U.S., naming six routes for the export of grain, including the ports of Mariupol and Berdyansk, controlled by Russia.

“As for the export of Ukrainian grain, we do not prevent it. There are several ways to export grain,” the Russian president said.

Putin also refuted the chorus of voices claiming that without 20 million tons of Ukrainian grain there would be a food crisis in the world. According to him, 20 million tons against a background of 800 million of world production is 0.5 %, which is drop in the ocean.

Moreover, according to the Russian leader, there is no 20 million tons at the moment, and “20 million tons of Ukrainian wheat is a potential export.” In fact, the volume of Ukrainian exports is 6 million, while the Ministry of Agriculture of the Russian Federation believes that there are about only 5 million tons of wheat, he said.

If even 20 million tons is not much, then why were Biden and several Western politicians excited? The thing is that millions of tons of grain that are in Ukrainian elevators and ports are products contracted by Western companies, and American, Dutch and other Western merchants are faced with the fact that they cannot export the contracted products.

A list of the largest grain exporters from Ukraine is an illustrative example. For the 2020-2021 season, Kernel Group with 7.8 million tons, owned by a member of the Jewish community and Swiss resident Andriy Verevsky and tied to Western business interests, is in first place. Another major exporter, Nibulon, owned by Ukrainian agrarian Alexey Verevsky, with 4.2 million tons is in second place. The Dutch Louis Dreyfus Company B.V. from Rotterdam, with 4 million, is slightly behind LDC. Then there is the Americans Cargill with 3.2 million tons. The Swiss Sierentz with 2.7 million tons of cereals closes the top five. Cofco (China, 2.6 million), Agroprosperis, a Ukrainian subsidiary of investment fund NCH Capital (USA, 2.2 million), Archer Daniels Midland (USA, 2.1 million), Bunge (USA, 1.8 million), and Olam (Singapore, 1.7 million tons) are also in the top ten.

So, the list of the top 10 exporters from Ukraine clearly shows why Biden and the White House got so excited. Most of the companies are from the US.

That is why Russia and the U.S. are the main figures of the grain deal, even though Washington did not formally take part in the talks in Istanbul.

Scrape Bottom of Bucket

In this vein, the talks in Turkey, attended by military delegations from Ukraine and Russia, as well as Turkey and the UN, gave great hope.

“We see that the parties are ready to solve this problem,” said Turkish National Defense Minister Hulusi Akar. “We will try to implement by carrying it out in coordination with the UN. In that sense, it was decided that the Ukrainian and Russian delegations should meet again in Turkey next week. At this meeting, which we will hold next week, all the details will be reviewed again and a document on the work we have done will be signed.”

So there is outcome of negotiations in Istanbul:

- Establishment of a coordination center in Istanbul, “where representatives of all parties will be present” (Hulusi Akar);

- Agreements on control and coordination mechanisms, as well as on demining of ports in the Black Sea (UN Secretary General Antonio Gutiérrez);

- Joint control at exits from ports and points of entry (Acar);

- Ensuring the safety of navigation on transit routes (Acar).

“As Ukraine grain deal emerges, U.S. aims to ease concerns over Russia sanctions,” says the headline of a Reuters story.

The U.S. confirmed its interest by the fact that just a few hours after the talks in Turkey, the U.S. Treasury Department lifted some of the sanctions against Russia. The U.S. Department of Treasury quickly clarified that agricultural and medical products are not subject to U.S. sanctions.

Thus, from now on, the sanctions do not apply to transactions with goods and equipment for agriculture, as well as drugs, medical products / components and software updates for medical equipment. In addition, Russian companies can carry out transactions related to the prevention, diagnosis and treatment of the novel coronavirus infection, including medical research.

To be more precise, human and animal food, mineral and organic fertilizers, seeds, medicines, etc. were exempted from sanctions. Gazprom Germania GMBG, a former German subsidiary of Gazprom, is also exempt from sanctions and has a license for transactions until December 16.

At the same time, the official bulletin of the Office of Foreign Assets Control states that the United States “strongly supports United Nations efforts to bring both Russian and Ukrainian grain to world markets.”

To complete the picture, it should be noted that Russia is the No. 1 wheat exporter in the world, but volumes have fallen in the last marketing year. In June, the U.S. Department of Agriculture named Russia the largest wheat exporter in the world. The USDA estimates that Russia will export 33 million tons of wheat in the 2021-2022 marketing year (that's July 2021 to June 2022), down 16 percent from the previous period.

The Americans forecast that in the 2022-2023 marketing year, Russia will retain its status as the largest exporter of wheat, increasing the figures to 39 million tons, or 18.2% more.

In this case, the researcher Daniel Workman notes that in 2020-2021 the price of wheat in the world has risen by 24.2%.

According to Workman's calculations, the 5 largest exporters of grain (Russia, USA, Australia, Canada and Ukraine) cover 3/5 or 59.5% of the total value of food grain exports in the world.

According to the Food and Agriculture Organization (FAO,) there are 15 largest exporters of wheat in the world in 2021, which in total shipped 91.8% of world exports in monetary terms such as:

1) Russia - $7.3 billion (or 13.1% of total world exports);

2) U.S. - $7.29 billion (13.1%);

3) Australia - $7.2 billion (13%);

4) Canada - $6.6 billion (11.9%);

5) Ukraine - $4.7 billion (8.5%);

6) France - $4.6 billion (8.2%);

7) Argentina - $3 billion (5.3%);

8) Germany - $2 billion (3.6%);

9) Romania - $1.8 billion (3.3%0;

10) India - $1.7 billion (3.1%);

11) Bulgaria - $1.4 billion (2.5%);

12) Kazakhstan - $1.1 billion (1.9%);

13) Poland - $0.994 billion (1.8%);

14) Lithuania - $0.826 billion (1.5%);

15) Hungary - $0.670 billion (1.2%).

No Questions Whatsoever

What conclusions can be drawn already? So, there are two scenarios: a military operation and negotiations. Moreover, negotiations between Ukraine and Russia do not mean that the Kremlin will stop the course of the special military operation.

First, the Kremlin shows that “we are ready to negotiate” but negotiations do not affect military plans and, consequently, the course of military operations. Grains and the special military operation are two different issues.

This means that the Kremlin plans to achieve all of its objectives during the special military operation. First of all, it is about pushing Russia's western border away from Moscow and important industrial cities as far as possible.

At the same time, the Kremlin is ready to negotiate with the U.S. and the collective West, in the broad sense on related issues, exchanging such agreements for the lifting of sanctions. For example, to agree on the export of food products contracted in Ukraine by Western companies.

Secondly, Washington is also ready to trade agreements for the lifting of sanctions against Russia, as we have seen in the example of the U.S. Treasury Department's decision.

Third, the grain deal is important not only for the United States, but also for the Russian Federation. This is why Russian exports are also part of the package deal. This is all the more important given that Russian exports were in serious decline on the eve of the special military operation, while the United States, on the contrary, was increasing its volumes. In addition to the fact that the grain deal is an additional blow to Western sanctions policy, there is another important point.

If Ukraine and Russia reach an agreement, Russian ships will also be able to export grain from ports on the Black Sea. Unexpected, huh? After all, we are talking about ports such as Berdyansk, which just yesterday were Ukrainian ports. If the grain deal takes place, then the USA, the UN and any other structures will have no questions to the ships under the flag of Russia, which transport grain from Berdyansk, Mariupol or any other port, which yesterday were considered to be Ukraine.

Another conclusion is that in case the grain deal is made Turkish President Recep Tayyip Erdoğan will strengthen his status as an influential international negotiator, who does not just make slogans like the French Macron, but actually “solves the issues.”

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