Harvesting in the Kharkiv region, northeastern Ukraine, February 19, 2022 (AFP/SERGEY BOBOK)
Negotiations are progressing to open secure sea corridors to get out the 20 million tonnes of grain still stuck in Ukraine as well as the impending harvests, but a deal, if it materializes, will not immediately relieve importing countries.
Crucial negotiations
Since early June, negotiations have multiplied, with Turkey mediating between Russia and Ukraine, two major agricultural powers weighing 30% of world wheat trade.
These negotiations are crucial, because no country has really come to fill the lack of Ukrainian grain (initially 25 million tons) on the market where the prices of agricultural raw materials were already very high even before the start of the Russian invasion on February 24 – in particular due to the post-Covid recovery.
The war led to a jump in the price of cereals (wheat, maize), unsustainable for the countries most dependent on their imports, such as Egypt, Lebanon or Tunisia.
In recent weeks, prices have begun a gradual decline, favored by the arrival of a new harvest, and fueled by the fear of recession and by the progress of discussions on these maritime corridors.
A first round of negotiations failed in early June in Istanbul. New negotiations are underway and Ankara said on Monday that “an agreement in principle” had “been found” for the establishment of a secure maritime corridor. Moscow welcomed in the night from Tuesday to Wednesday “advances”, while specifying that “all the questions” were not yet settled.
What role does Turkey play?
“There are only a handful of countries, including Turkey and Qatar, capable of talking to almost anyone and avoiding a major blowback,” Colin Clarke, from the center of reflection Soufan, based in the United States.
Firefighters battling a fire in a grain field sparked by shelling in the Kherson region of southern Ukraine on July 18, 2022 (UKRAINE EMERGENCY MINISTRY PRESS SERVICE/AFP/Handout)
Its President Recep Tayyip “Erdogan has proven that he can do it and that is why he has been a trusted intermediary not only for the Russians, but also, I think, reluctantly, for the NATO countries: c It’s the best they have,” Clarke said.
The researcher sees in this crisis a “playing card” for Ankara: Erdogan “can tell everyone that he is working to solve the world food crisis, but we know that Turkey is obstructing negotiations on many other fields. They have their concerns, and their priorities do not always correspond to the priorities of the international community”.
What deal?
The export of wheat, corn and sunflower from Ukraine was 90% by sea and mainly through the port of Odessa, which concentrates 60% of the country’s port activity.
View of the coastline of the port city of Odessa, Ukraine, April 12, 2022 (AFP/Archives/Ed JONES)
Any agreement will have to frame various essential stages: the first will be the demining of the ports, carried out “by the Ukrainians and/or the UN”, then “the loading of the boats, which could be done under UN cover” and finally “the inspection loads” and the escort of ships, demanded by Russia, which wants to be able to check that this traffic does not contain weapons, explains Edward de Saint-Denis, broker at Plantureux and associates.
Several points remain highly debated: if Moscow obtains the power to control – and therefore possibly seize – ships, where will this control take place: in Ukrainian or international waters? Which vessels will be authorized to carry out these loads, with crews of which nationalities? “Russians don’t want Ukrainians and vice versa,” the broker points out.
Turkey had once offered its fleet, but a compromise could be made on “flags of convenience”, according to a market observer.
What consequences?
“In the very short term, an agreement will lower prices, but in terms of flow, nothing will happen immediately,” said Edward de Saint-Denis.
“It takes between one and two months for demining” and it remains “to restore the landing zones”, especially in Odessa where the administrative part of the port was damaged by bombardments, he explains.
Despite many possible obstacles, for agricultural market analyst Gautier Le Molgat, it is today “in everyone’s interest for traffic to resume on the Black Sea: for the Ukrainians first, but also for the Russians, who are going to have a bumper crop to export”.
© 2022 AFP
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