Trade expresses confusion on grain corridor deal length, as Russia threatens exit

The official extension of the Black Sea grain corridor deal is the one thing that all signatories - Russia, Ukraine, Turkey and the UN - all agree on, with agreement reached on March 18, and marking an end to the protracted negotiations, bad-tempered rhetoric and a lack of certainty that has marked trading in the region in recent weeks.

However, one key area where consensus remains elusive is the question of just how long the agreement will last.

According to statements from the UN, Turkish, and Ukrainian officials, the extension had been agreed, but it was only Ukraine that mentioned the 120 day-period.

The UN and Turkey have not said a word about the deal’s length, while earlier in the week Russia claimed they had only agreed to a 60 day-extension.

As such, industry sources have expressed confusion, with none of them really able to say what is the real term that has been agreed.

The majority of trade sources spoken to by Agricensus said that they would consider it a 120-day agreement, as the deal - with all its current stipulations - was extended.

As such, they expect it to mean it operates with all the same terms as had been previously agreed.

However, many of those sources also would not exclude the possibility that once the 60 days are over, Russia will try to delay the execution of the deal, or potentially even withdraw from it.

And as a confirmation of that, the Russian ministry of foreign affairs published a note on March 20, which again said that they had only agreed on 60 days and as this position was “officially brought” to the attention of the other participants of the initiative, and no formal objections followed, Russia considers the deal is working only for the next two months.

Russian reservations

The ministry also added that Russian authorities will consider the extension of the deal after 60 days, but only if it deems that progress has been made in that time towards its own set of demands.

That list includes the re-admission of the Russian state agriculture bank, Rosselkhozbank, to the international SWIFT payment system; the resumption of supplies of agricultural machinery, spare parts, and services; the cancellation of restrictions on insurance and reinsurance plus a ban on access to ports. 

It also mentioned the restoration of the work of the Togliatti-Odesa ammonia pipe, which the Ukrainian side sees as impossible amid ongoing fighting, and finally unlocking foreign assets and accounts of Russian companies related to the production and transportation of food and fertilizer.

“Without promotion to fulfill these requirements that are absolutely not new and should have been resolved as part of the Russia-UN Memorandum, our participation in the Black Sea initiative will be suspended,” the official note from the ministry website showed.

It also comes at the same time that Russian president Vladimir Putin spoke at an international parliament conference and said that if the grain deal wasn't prolonged, Russia would supply wheat to developing African countries for free.

“If we decide not to extend the deal after 60 days, we are ready to supply from Russia all the volume that was not supplied for the previous period into the neediest countries of Africa for free,” Putin said.

But he didn’t specify exactly what period he meant and what are “the most needy African countries.”

He also continued to perpetuate some of the myths around the corridor's operation to claim that Ukraine has not followed the deal as the bulk of exports are not going to the poorest countries but to developed ones. 

Since the start of the grain deal in late July, Ukraine has managed to export 25.2 million mt of agriculture products, with 2.85 million mt moved to African countries.

In terms of the poorest countries like Ethiopia, Sudan, Djibouti, Somalia, Afghanistan, Lebanon, Libya, Yemen, Djibouti, and Kenya where exports so far reached 1.56 million. 

At the same time, Russia has dispatched 10.9 million mt of grains to African countries out of a total of 37.7 million mt exported since July 1, with 8.7 million mt leaving to North Africa.

That region used to be the main buyer for Russian wheat, and a big part of the supply was sold through international state tenders, particuarly into Egypt and Algeria.