Russia's Preconditions for Sustaining the Grain Initiative: Western Stance and Alternative Paths

Russia's Preconditions for Sustaining the Grain Initiative: Western Stance and Alternative Paths

On his way back from a meeting with Russian President Putin, Turkish President Recep Tayyip Erdoğan confirmed that Russia is prepared to resume the U.N.-brokered Black Sea Grain Deal, provided that the Russian Agricultural Bank is reconnected to the global SWIFT system, in addition to ensuring the security of the ships transporting the grain.

Russia had previously announced the suspension of its activities under the Black Sea grain export deal, which allows the flow of grain through Russia and Ukraine to the Middle East and African countries, in mid-July 2023.

Russia has set conditions for the resumption of the agreement, including re-connecting its Agricultural Bank to the global SWIFT system, resuming the supply of agricultural machinery, lifting restrictions on port insurance, and lifting account bans for agricultural and transport companies. These conditions have been reiterated by Putin on multiple occasions and were supplemented by demands to lift sanctions on all Russian banks and to resume the operation of the Togliatti-Odessa ammonia pipeline, which had been damaged due to the war.

The conditions put forth by Erdoğan, within the framework of Turkish mediation efforts, represent a step back by Russia from the full set of previously stated requirements. Russia is now effectively content with just reconnecting its Agricultural Bank to the global SWIFT system in order to receive the proceeds of its sales, as well as ensuring the security of ships arriving for loading. This is because no trader or intermediary would want to risk transporting uninsured goods.

Western countries see Russia's actions as a form of global extortion on the issue of food security. This sentiment manifests as a refusal to accept Russia's conditions, especially given strong opposition from Ukraine; as the latter views the lifting of sanctions as an act that would strengthen Russia at the expense of Ukraine's own stance.

The Western and Ukrainian alternative to the grain deal appears to be the transportation of Ukrainian grain only, via land and river routes to neighboring countries like Poland, for example. However, this option faces challenges related to increased costs and the need for approval from neighboring countries, and it certainly excludes Russian grain.

Until mid-2024, which marks the next harvest season for most grains, there doesn't seem to be any radical solutions to the issue; this means that grain prices will likely remain elevated on a global scale. Consequently, countries most affected in the Middle East and Africa, such as Egypt and Nigeria, will be compelled to seek alternative sources to make up for the shortfall caused by the rising demand for grain.