“The Black Sea Grain Deal: Who Will Pay the Price for Russia’s Decision?”

On Sunday, the Turkish ship TQ Samsun left the port of Odesa in Ukraine carrying 23,500 metric tons of corn and 15,300 metric tons of rapeseed to the Netherlands under the final hours of the Black Sea grain deal.

Now, the world has entered yet another period of uncertainty and although Canada and the U.S. are not among the top receivers of grain shipments from the Black Sea, experts are calling for Canadians to keep a close watch on how markets react.

On Monday, Russia withdrew from the grain deal, under which it allowed the passage of ships from Ukrainian ports on the Black Sea carrying food grain shipments.

Kremlin spokesperson Dmitry Peskov said Russia would suspend the Black Sea Grain Initiative until its demands to get its own food and fertilizer to the world are met. While Russia has complained that restrictions on shipping and insurance have hampered its agricultural exports, it has shipped record amounts of wheat.

“When the part of the Black Sea deal related to Russia is implemented, Russia will immediately return to the implementation of the deal,” Peskov said.

The deal last year was a crucial breakthrough, brokered by Turkey and the United Nations, that allowed Ukraine to ship 32.8 million metric tons of grain. More than half of this export went to developing nations around the world and had been cut off during Russia’s invasion.

“(Under the Black Sea agreement), the World Food Program has shipped more than 725,000 tons (of food grains) to support humanitarian operations, relieving hunger in some of the hardest hit corners of the world including Afghanistan, the Horn of Africa and Yemen,” United Nations Secretary-General António Guterres said on Monday.

The initiative is credited with helping lower the soaring prices of wheat, vegetable oil and other food commodities.

Ukraine and Russia are both major global suppliers of wheat, barley, sunflower oil and other affordable food products that developing nations rely on.

A key demand by Moscow is the reconnection of the Russian agricultural bank Rosselkhozbank to the SWIFT international payment network. It was cut off by the European Union in June 2022 over Russia’s invasion of Ukraine.

Guterres said he sent a letter to Russian President Vladimir Putin last week, outlining a proposal. Among his offers was allowing the U.S.-based bank JPMorgan Chase to process Russian food grain payments.

However, Russian Foreign Minister Sergei Lavrov said on Thursday that he had not heard of any such proposal. Guterres expressed his disappointment.

“I am deeply disappointed that my proposals went unheeded. Today’s decision by the Russian Federation will strike a blow to people in need everywhere, but it will not stop our efforts to facilitate the unimpeded access to global markets for food products and fertilizers from both Ukraine and the Russian Federation,” he said.

What will the impact be?

While the impact is expected to be felt in several developing countries in Africa and western Asia, United Nations Black Sea Initiative Joint Coordination Centre data shows that food shipments from the Black Sea were meant for destinations across the world.

China (eight million metric tons), Spain (six million metric tons), Turkey (3.2 million tons) and Italy (2.1 million tons) have been the biggest recipients of cargo from Black Sea ports since the deal was struck.

The implications will be felt all over the world, and an Oxfam Canada spokesperson told Global News they were concerned about the ripple effects the suspension of the deal could have on food prices, food donation drives and inequity in Canada.

It could also offer an opportunity to create more breadbaskets around the world, the spokesperson said.

“Now that this deal is off the table, it is even more urgent to rethink how to feed the world,” said Hanna Saarinen, an Oxfam international food expert.

“Global hunger will not be solved by growing crops in only one of the world’s few breadbaskets. We must stop this unhealthy reliance by diversifying production and investing in small-scale farmers in poorer countries to increase food production where needed.”

Saarinen noted that though the deal “has played a part in calming skyrocketing food prices, it is not the cure-all for world hunger.”

Experts believe that the end of the Black Sea grain deal will make global hunger significantly worse.

Last week, the UN released its annual State of Food Security and Nutrition in the World report, which said that approximately 725 million people faced chronic hunger in 2022. This figure is up from 613 million in 2019.

The war in Ukraine has caused the UN to update its projections on world hunger.

“Updated projections show that almost 600 million people will be chronically undernourished in 2030 … this is about 119 million more undernourished people than in a scenario in which neither the pandemic nor the war in Ukraine had occurred, and around 23 million more than in a scenario in which the war had not happened,” the report said.

How will it affect Canadians?

“This is a very concerning development for global food security. More broadly, at the international level, there’s concerns about the continued supply of grain and other foodstuffs from Ukraine to developing countries in particular, which are their main export markets. And there’s also questions about kind of the impacts this can have on global food prices, and in particular, the reaction of commodity markets to this development,” said Matias Margulis associate professor at the School of Public Policy and Global Affairs, and the Faculty of Land and Food Systems at the University of British Columbia.

Margulis said that while the U.S. and Canada are major food exporters, the end of the Black Sea deal could deal some shocks to the global supply systems. “If markets react very negatively to this development, that could lead to a rise in food prices across the board so we can contribute to food inflation here in North America and globally,” he told Global news.

Ukraine’s imports will also mean aid may dry up for the region known as the Horn of Africa. “This might require the government of Canada and other western countries to increase aid and ensure food flows to these countries in the absence of exports from Ukraine.”

The Horn of Africa, consisting of Kenya, Somalia, Sudan, South Sudan and Uganda. Sudan is currently mired in a civil war, which makes the region particularly sensitive to global shocks. “The Horn of Africa is sort of experiencing a triple crisis. It’s experiencing food insecurity, civil conflict, as well as climate change related shocks. So. there’s a lot of need for humanitarian assistance to ensure the situations in those countries doesn’t get out of control. I would expect that there would be some announcements from Canada and other countries on how they want to assist in respond to this humanitarian situation,” Mugalis said.

He added that Canadian NGOs, that work in the areas of food relief, will also likely be facing pressures as result of the suspension of the Black Sea Grain deal.

The recent decision by Russia to let the Black Sea grain deal die has sent shockwaves through the global agricultural and economic sectors. This move has far-reaching implications that extend beyond Russia’s borders, leaving many wondering who will bear the brunt of its consequences.

The Black Sea region, comprising countries such as Russia, Ukraine, and Kazakhstan, has long been a key player in the global grain market. These countries are major exporters of wheat, corn, and other grains, supplying a significant portion of the world’s food supply. The Black Sea grain deal served as a crucial agreement that facilitated the smooth trade of these commodities, ensuring stability in the market and meeting the growing demand for food.

With Russia’s decision to let the deal die, the stability of the global grain market is now at stake. As one of the largest grain exporters in the region, Russia’s move will disrupt the supply chain and potentially lead to price hikes and food shortages. The impact will be felt not only by importing countries heavily reliant on Black Sea grain but also by consumers worldwide.

Import-dependent nations, particularly those with limited agricultural resources, will be hit hardest by the fallout of Russia’s decision. Countries in the Middle East, North Africa, and Asia, which heavily rely on Black Sea grain imports to feed their populations, may face significant challenges in securing an adequate food supply. The sudden increase in prices could exacerbate existing food insecurity issues and put vulnerable populations at even greater risk.

Moreover, the Black Sea grain deal’s demise will have a ripple effect on the global economy. As food prices rise, inflationary pressures may mount, affecting not only the agricultural sector but also industries across the board. Businesses reliant on affordable grain, such as livestock and poultry farming, could experience higher production costs, potentially leading to reduced output and job losses.

The situation also presents an opportunity for other grain-exporting countries to step in and fill the void left by Russia. Competitors such as the United States, Canada, and Australia may increase their grain exports to meet the growing demand. However, this transition is not without challenges, as logistical constraints and differences in quality standards could pose obstacles to seamless trade.