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Two weeks before the expiration of the grain deal, also known as the Black Sea Grain Initiative, the intrigue remains. Whether the agreement will be extended, representatives of Forbes analyzed in their material.

The agreement, which allowed Ukraine to export grain and other agricultural products from three Black Sea ports in the Odessa region, was concluded by Russia and Ukraine with the mediation of Turkey and the UN in Istanbul on July 22 last year for 120 days. At the same time, Russia and the UN signed a three-year memorandum of intent, under which the UN pledged to help remove obstacles to the export of Russian grain and fertilizers.

On the eve of the end of the first term of the agreement, on October 29, Russia announced the suspension of the deal, accusing Ukraine of organizing a drone attack on the ships of the Russian Black Sea Fleet in Sevastopol under the cover of a humanitarian corridor. But a few days later, on November 2, President Vladimir Putin announced the renewal of the agreement after receiving assurances from Turkey that Ukraine would not use humanitarian corridors for military purposes. At the same time, Putin said that Russia reserves the right to withdraw from the agreement if Ukraine violates these guarantees.

Since none of the participants announced their withdrawal from the agreement, it was extended for another 120 days, until November 18. From the beginning of the deal until March 2, Ukraine managed to export 22.7 million tons of agricultural products, of which 49% was corn, 28% wheat, 6% sunflower meal and 5% sunflower oil.

Under the terms of the agreement, it is automatically extended for another 120 days, unless either party raises an objection to the extension. Russia has not yet explicitly announced its intention to suspend the deal, but on Wednesday, March 1, the Russian Foreign Ministry published a comment by the official representative of Maria Zakharova, which says that Kiev is preparing a provocation "to accuse the Armed Forces of the Russian Federation of allegedly inflicting indiscriminate strikes on radiation hazardous objects that can lead to the leakage of radioactive substances and contamination of the area. To this end, according to Zakharova, radioactive substances were delivered to the ports of Chernomorsk and Odessa, which are involved in the grain deal, bypassing customs inspection, which can be used to create a “dirty bomb” - ammunition containing radioactive substances.

Deputy Foreign Minister Sergei Vershinin, who oversees the deal on the Russian side, told RTVI on February 13 that the concept of an Istanbul package deal and an extension of the grain deal in March without tangible results does not seem appropriate for the Russian side.

“In fact, only the Black Sea initiative to export Ukrainian food is being carried out, and even then in a format far from the originally declared humanitarian goals - 70% of the cargo consists of fodder corn and feed grain, is sent mainly to countries with high incomes (47%) and above average (33%), only 3% of products were delivered to the countries in need (Somalia, Ethiopia, Yemen, Sudan, Afghanistan, and also Djibouti), Vershinin said in an interview. - Progress in the implementation of the Russia-UN Memorandum on the normalization of domestic agricultural exports tends to zero - all restrictions on bank payments, insurance, access to ports remain, and new ones are added to them. Under these conditions, the whole concept of “package” interconnected Istanbul agreements aimed at overcoming the food crisis risks losing its meaning.”

Russia's position on the issue of further continuation of the Black Sea initiative remains the same - without tangible results on the implementation of the Russia-UN Memorandum, primarily on the real removal of sanctions restrictions on Russian agricultural exports, the concept of the Istanbul "package" agreements and the simple extension of the Ukrainian document are inappropriate, Vershinin argues.

“The export of Russian agricultural products is being blatantly obstructed around the world, no matter how the representatives of the EU, who are used to telling lies, convince everyone otherwise,” Russian Foreign Minister Sergey Lavrov said at the G20 Foreign Minister’s plenary meeting in New Delhi on March 2. - Shipments of gratuitous cargoes of Russian fertilizers, in particular for Africa, are still blocked in the ports of Europe. The West shamelessly buries the well-known humanitarian initiative of the UN Secretary General.”

Late on Thursday evening, March 2, the Foreign Ministry issued a separate statement reiterating Russia's claims about Western countries' failure to comply with the Istanbul agreements.

What does Russia want

The Russian side, as one of the conditions for extending the deal, insists on reconnecting to the SWIFT international payment system of Rosselkhozbank as the main Russian bank for financing agricultural transactions. The official representative of the European Commission, Peter Stano, said back in November that the EU had heard Moscow's request to restore Rosselkhozbank in the SWIFT system and would consider this possibility. However, until now the bank remains disconnected from the system.

The second demand of Russia is the resumption of operation of the Togliatti-Odessa ammonia pipeline, which was turned off by the Ukrainian side on February 24.

“The provision on the supply of fertilizers and raw materials for their production, including ammonia, to world markets is spelled out in both Istanbul agreements,” Vershinin noted. - Transshipment of ammonia through the Togliatti-Odessa pipeline and its export were to be resumed along with the launch of the Black Sea initiative and the start of transportation of Ukrainian food. However, this did not happen and is not happening because of the position of Kyiv, which conditions the restoration of the ammonia pipeline with political conditions. The ammonia pipeline, pumping about 2.5 million tons of raw materials a year, enough to produce 7 million tons of fertilizer to feed 200 million people, is idle only and exclusively because of the position of Kiev, Vershinin said, adding that there are technical possibilities for resuming work and no additional agreements are required for this.

The restart of the ammonia pipeline is supported by US and European officials, given the role of ammonia as a key ingredient in many fertilizers, Politico writes. “However, Ukrainian officials cite security concerns, and some Western allies of Kyiv are concerned that the ammonia pipeline could provide Moscow with a new source of revenue,” adds Politico.

Russia is also seeking to unblock Russian fertilizers stuck in European ports, which Moscow is ready to provide free of charge to countries in need. The first and only consignment so far of 20,000 tons was sent from the Netherlands to Malawi on November 29, 2022, arrived at the waypoint in Mozambique on December 28 and is still on its way to the recipients. Latvia announced its readiness to unfreeze another batch of 30,000 tons out of more than 200,000 tons in the country at the beginning of February, but the exact timing of sending this cargo is still unknown. “There are heated discussions about the ship in Latvia,” Stefan Dujarric, spokesman for the UN Secretary-General, said at a briefing on February 22. “As soon as we have good news, we will share it with you.”

What does Ukraine want

At the end of February, Reuters reported that Ukraine sent a request to the UN and Turkey to start negotiations on extending the grain deal. According to Deputy Minister of Infrastructure of Ukraine Yuri Vaskov, Kyiv intends to seek an extension of the deal for at least a year and the inclusion of another Black Sea port, Nikolaev, into it. Vaskov said the port, which previously accounted for 35% of Ukraine's agricultural exports, would take a maximum of two weeks to start operations.

The European Business Association of Ukraine (EBA), which brings together European entrepreneurs in this country, also called on the UN and Turkey to help extend and expand the Black Sea Grain Initiative.

In an open letter, the EBA calls for free commercial navigation in the Black Sea for all parties or for the introduction of screening of all Russian ships sailing in the Black Sea, setting equal conditions for Ukrainian and Russian exports. She also supports the extension of the deal for at least a year, as well as the inclusion in it of the Nikolaev sea port and a number of other Black Sea ports and terminals, in particular the port of Olvia, located 25 km from Nikolaev.

Ukraine is also exploring the possibility of organizing navigation in the Black Sea outside the framework of the Black Sea Initiative and wants to enlist the support of the International Maritime Organization (IMO) in this. “We are talking not only about ships under the Ukrainian flag. We are talking about international merchant ships, not warships,” Yury Vaskov told Politico, adding that this could be “Plan B” in case the deal is not renewed. The Verkhovna Rada of Ukraine has already approved a law on the creation of an insurance fund for $500 million to pay compensation for possible damage to civilian ships calling at the country's ports.

What is the probability of extending the Black Sea initiative

The extension and expansion of the Black Sea initiative was supported by the leaders of the G7 countries (USA, Germany, Japan, Great Britain, France, Italy and Canada) in a statement in connection with the anniversary of the start of the "special operation". The United States did it separately. Secretary of State Anthony Blinken, at a press conference in New Delhi on March 2 following the G7 foreign ministers meeting, urged the organization to advocate for the extension and expansion of the grain initiative "for the sake of food security for the most vulnerable." China also supported the deal in a Foreign Ministry statement on a political settlement of the Ukrainian crisis.

“Before the events of recent days [meaning Zakharova’s statement and reports about the penetration of saboteurs into the Bryansk region], we believed that the probability of extending the deal was very high, and the market probably thought the same way, judging by the fact that grain prices collapsed on it last week,” Andrey Sizov, director of the SovEcon analytical agency, told Forbes. — An additional trigger, in our opinion, was the fact that China in its document specifically wrote the ninth paragraph, which supports the extension of the grain deal. Which, in our opinion, significantly increased her chances. Recent events have dampened some confidence, but we still think the deal will be extended.”

“There is a high probability that the deal will be automatically extended without changes for another 120 days, since the contradictions of the parties cannot yet be resolved, despite persistent negotiations,” said Oksana Lukicheva, commodity markets analyst at Otkritie Investments. “Risks of its non-renewal exist, but the likelihood of this is currently low, since, as follows from various statements, there is still interest in the deal.”

Most likely, the deal will be extended on the current terms for another four months, the president of the Russian Grain Union, Arkady Zlochevsky, believes. “They extended it in November, although everything was the same: the same discussions and demands of the parties, and the Foreign Ministry made statements, and there were corresponding debates with the UN,” he told Forbes. “And they extended it anyway, although the deal, as it was one-sided, remains so and does not work in our direction at all.”