Extension of the Ukraine Black Sea Grain Initiative: Impact on Global Food Supply Chains

Since the beginning of the Russian invasion of Ukraine in February 2022, Ukrainian grain exports have been severely disrupted. Russian military vessels were carrying out a blockade of Ukrainian ports in the Black Sea for four months. On July 22 2022, an agreement was signed between Russia and Ukraine, mediated by the United Nations and Turkey, to maintain a safe maritime humanitarian corridor in the Black Sea, also known as the Black Sea Grain Initiative. Since then, about 900 ships carrying grain and other food items have departed from the Ukrainian ports of Chornomorsk, Odessa, and Yuzhny/Pivdennyi. When the time came of the end of the original deal, Ukrainian President Volodymyr Zelensky and the UN Secretary-General António Guterres both called for an extension of the deal, thereby enabling Russian and Ukrainian wheat and fertilisers to be exported through the Black Sea. 

Initially, Ukraine and Russia had signed the deal for an initial 120 days last July, thereby averting a possible global food crisis. A subsequent November extension to the Black Sea Grain Initiative for an additional four months was due to expire on March 18, 2021, unless it was extended. While the UN and Ukrainian government backed the extension, the Kremlin was unhappy with specific provisions of the deal, thereby renewing fears of grain traders regarding potential risks to supplies and the potential increase in global grain prices. On March 18, 2023, the Ukrainian Deputy Prime Minister elucidated that the deal had been extended for 120 days. However, Moscow reckoned that it had agreed to a 60-day extension only, and a Russian Foreign Ministry letter to the UN said that the country was only willing to extend beyond the stated 60 days in the face of ‘tangible progress' towards unblocking flows of Russian food and fertilisers to world markets. The Turkish President, Recep Tayyip Erdogan, confirmed the rollover of the deal but did not comment on the exact duration of the extension.

As of March 2023, over 23 million tonnes of grain and other foodstuffs have been exported via the Black Sea Grain Initiative. Approximately 49 per-cent of the cargo constituted maize, the grain which was most affected by blockages in Ukrainian granaries at the start of the war, i.e. (75% of the 20 million tonnes of grain stored). It had to be displaced quickly to make room for the summer harvest. Wheat constituted 28 per-cent, sunflower products 11 per-cent and others 12 per-cent. Over 65 per-cent of the wheat exported through the Black Sea Grain Initiative went to developing countries. Maize was shipped to both developing and developed countries almost equally. 63 per-cent of wheat was exported to developing countries and 35 per-cent to developed countries. So far, approximately 456,000 tonnes of wheat departed Ukrainian ports to reach Ethiopia, Yemen, Djibouti, Somalia, and Afghanistan. The EU is a major global producer and exporter of wheat. In 2022, according to estimates, the EU exported approximately 36 million tonnes of soft wheat to Algeria, Morocco, Egypt, Pakistan, Nigeria and others. The Russian invasion of Ukraine caused a significant surge in food prices in global markets; the prices of particular grains rose steeply. The impact on price and the types of grain which have been exported through the Black Sea Grain Initiative is made available by an infographic published by the the Council of the European Union.

The extension of the deal is a significant success. Grain traders were concerned about the effects on global food prices and what it would imply for Ukraine’s summer wheat harvest had it not been extended. Shipping industry Representatives also appreciated the smooth functioning of the grain corridor. They feared that any end to the agreement would lead to the instantaneous stopping of vessels travelling to the Black Sea. Guy Platten, the Secretary General of the International Chamber of Shipping, elucidated that while the corridor had been a great success, any failure in a roll-over would have caused significant concern for shipping companies, who would not want to endanger their vessels and crew and would find it difficult to obtain insurance. 

Market experts had also shared the fears that at a time when developing countries like Pakistan have been impacted by their own fair share of climate catastrophes like floods, leading to a massive destruction of crops, surge in energy prices as well as shocks to global supply chains due to the Russian invasion of Ukraine and high levels of inflation, a shock to grain exports, and subsequent rises in food prices would lead to a significant food crisis. Even in the developed world, for instance, in the EU, amid the cost of the living crisis and supply side shocks, higher global food prices would make essential edible items too expensive for people. Thus, the renewal of the agreement has been deemed a significant achievement.

Before the war, exports from Russia and Ukraine constituted about 30 per-cent of the global food trade. Between 5m to 6m tonnes of grain were exported each month from Ukraine’s seaports, according to the International Grains Council (IGC). The volume carried by ships via the grain corridor gained momentum towards the end of 2022, as per the Executive Director of the IGC, i.e. a very impressive level of export. In November and December 2022, Ukraine was close to approximately the same level as before the war in terms of exports by sea plus inland. While exports had slightly reduced in January and February 2023 due to poor weather, Ukrainian power outages affecting port facilities and delays in grain inspection delays, however, the overall success of the shipments of essential wheat, maize, oil seeds and barley from the Black Sea since August 2022 to countries reliant on grain imports had led to a fall of 30 per-cent in global wheat prices since its June peak. Thus, the 60-day extension of the agreement was widely praised and calmed fears of potential after effects on a wide range of industries and food prices.

Despite Kremlin’s concerns, it is likely that the UN and Turkey would mediate to have the agreement extended beyond the 60-day period and that Russia would agree to that because both Ukraine and Russia export considerable amounts of world’s grain and fertiliser, together supplying approximately 28 per-cent of global traded wheat and 75 per-cent of sunflower oil during peacetime. Moreover, as of 18 March, the UN Secretary General was adamant to seek ways to unblock Russian food and fertiliser shipments, which were blocked by sanctions targeting Russian oligarchs and the state agricultural bank. The Kremlin blames these sanctions for the ongoing food insecurity in the Global South. In the coming days, we may see easing of some sanctions that target Russian food exports, while overall sanctions may persist.