Russia agrees grain deal extension, but pushes for 60 day cap

Representatives of Russia and the United Nations have met in Geneva to discuss the ongoing Black Sea grain corridor agreement, with reports indicating Russia is prepared to greenlight an extension, but only for 60 days. 

The meeting comes just five days ahead of the current term's expiration date, on March 18, with the agreement operating on a 120-day cycle up to now.  

Russia's Deputy Foreign Minister, Sergei Vershinin, said that the country does not mind extending the agreement, but only for 60 days instead of the 120 days agreed earlier in July and then in November.

Vershinin said that Russia's agreement depended on concrete measures to normalise Russian agricultural exports, returning to a familiar theme of blaming Western authorities for crimping Russia's export pace amid formal and informal international sanctions. 

The sanctions were imposed after Russia brutally invaded neighbouring Ukraine in February 2022. 

Most sanctions have targetted financial entities, individuals or Russian businesses with links to the Kremlin, but grains and foodstuffs are not the subject of restrictions. 

The Russian wishlist was extended to include "our agricultural exports, including bank payments, transport logistics, insurance, 'unfreezing' of financial activities and the supply of ammonia through the Togliatti-Odessa pipeline," Vershinin said, quoted in local media.

Uncertain

Traders have been split in their reaction, with some arguing that they see this as an effort at deploying additional leverage before agreeing the final extension, while others said that an extension for 60 days is better than no extension at all.

But a 60 day extension would not be suitable for Ukraine's grain exports, making it even harder to plan forward shipments as a two month timeframe effectively only allows spot trading.

That limited window is further compounded by the fact that ships arriving at Istanbul for inspections have been delayed by 25 days on average, with some vessels waiting up to 50 days - a delay that would be fundamentally incompatible with a 60 day agreement window.

In response, Ukraine's infrastructure minister, Oleksandr Kubrakov, said that the Black Sea Grain initiative agreement involved at least 120 days of extension, therefore Russia's position to extend the deal only by 60 days contradicts the documents signed by Turkey and the UN. 

As such, Ukraine will wait and see the official position of the agreement's partners, as the guarantors of the initiative. 

Meanwhile, while Russian grain traders have seen issues amid sanctions imposed on banks that have limited the number of financial entities through which it is able to process payments, grain export have increased during the last few months.

January's export pace registered 4.7 million mt while February mustered 3.6 million mt, compared to 2 million mt and 2.5 million mt respectively in the same period of 2022, before the full-scale invasion started.

However, with Russia hosting a huge 100 million mt plus wheat crop, its logistics have struggled to cope with the pace of exports, while end users have both sought to diversify their supply options and have pared back buying amid high prices - largely sparked by Russia's decision to invade Ukraine.