Black Sea Blackmail
July 26, 2023
  • Susanne Wengle
    N.R. Dreux Associate Professor of Political Science at the University of Notre Dame, and author of Black Earth, White Bread: A Technopolitical History of Russian Agriculture and Food.
Susanne Wengle writes that by keeping Ukrainian grain away from world markets Russia is harming Ukraine’s economy and holding hostage poor families across the world. Turkey’s President Recep Tayyip Erdoğan, the key figure in the original grain deal, is the most likely broker of its renewal.
On Monday July 17, 2023 Russia terminated its participation in the Black Sea Grain Initiative, an agreement that had allowed Ukrainian grain to reach global markets since July 2022. In the days that followed Russian missiles have struck granaries and port infrastructure in Odesa, one of Ukraine’s main ports.

The key question that is now on the table is whether Russia’s actions are a tactical retreat, meant to extract more concessions in the West’s sanctions regime, or if they are a further escalation in Russia’s war on Ukrainian farms. The answer matters critically for Ukrainian farmers, millions of poor families in grain importing countries, as well as farmers in Europe and the US.

On the one hand, Russia has repeatedly used its leverage over grain trade to extract concessions in the West’s sanction regime. The July 6 termination of the Russian participation may be yet another step by Moscow to force Ukraine and Western allies to comply with its demands. Russia claims that it is willing to resume the Grain Deal, if its conditions are met.

On the other hand, Russia has also waged a war on Ukrainians farms that has deliberately targeted the country’s ability to produce food for the world. Attacks on granaries and grain export terminals, the destruction wrought by explosion of the Kakhovka dam, mines and stolen tractors have all grievously harmed Ukrainian farms. Russia’s termination of the grain corridor and the bombing of ports in Odesa and most recently on the Danube could therefore be a further escalation of Russia’s strategy to harm Ukraine’s ability to earn export earnings and feed the world.

Either way, whether a temporary strategic or a deliberate escalation, Russia’s global food blackmail is extremely harmful. We should look to Ankara, though, not to Brussels or Washington D.C. for hope for a new grain deal.
Odesa, Ukraine's Black Sea port, is a key hub for grain exports. In late July Russia's multiple missile and drone attacks targeted  grain facilities and port infrastructure. Source: Wiki Commons
The Grain Corridor

The original grain corridor was signed in Istanbul on July 22, 2022, formally known as the Black Sea Grain Initiative (BSGI). Russia agreed to a limited and temporary easing of the naval blockade it had imposed in February 2022, allowing for the restoration of operations for grain trade at three seaports – Odesa, Chornomorsk, and Pivdenny.

As of mid-July 2023, after nearly a year in operation, the grain corridor has allowed Ukraine to export over 32.8 million tons of grain and helped control global food price inflation. The BSGI was a rare diplomatic victory of 2022 brokered and made possible by Turkey. It was also politically tenuous and at best a better-than-nothing solution to an urgent problem.

The BSGI’s most central problem is that it was initially limited for only 120 days, and then extended for even shorter periods of 60 days in November 2022 and March 2023.
“These periods are far too short for Ukrainian farmers, who need to plan ahead by at least one growing season. What is more, they have also given Russia an opportunity to blackmail Ukraine and its Western allies and to extract concessions on sanctions.”
Moscow has not failed to take this opportunity every time the agreement expired. On October 29, 2022, Russia unilaterally suspended its cooperation in the BSGI. By November 1, wheat futures jumped by nearly 10 percent. After three days of tense negotiations that involved a phone call between Turkish foreign minister Mevlut Cavusoglu and his Russian counterpart Sergey Lavrov, Russia announced it would temporarily rejoin the agreement. Wheat prices recovered by the end of the day. While expensive fuel, COVID-related disruptions and droughts have contributed to historically high grain prices, Russia’s actions are largely to blame for these fluctuations.

Black Sea Blackmail

How does Black Sea blackmail work? Why does Moscow hold such enormous power to sway food prices worldwide?

By blockading the Black and Azov seas, Russia controls how much Ukrainian grain, oilseeds and other food commodities reach global markets. While the world watched the encroachment of Russia’s army on Kyiv in February and March 2022, Russian naval forces attacked ships and blocked all commercial trade to and from Ukrainian ports. US intelligence also reported that Russia mined Black Sea waters in 2022. Since the beginning of the war, four ports were occupied — Mariupol, Berdyansk, Skadovsk, and Kherson (liberated by Ukraine in November 2022) — and the remaining Black Sea ports have been closed due to the blockade.

The Black Sea region is critical for the global food system because Russia and Ukraine are among the world’s largest exporters of agricultural commodities. Ukraine is blessed with fertile soil, ample rain and long growing seasons, and over the past 20 years, Ukrainian farmers have modernized and globalized: agricultural commodities account for roughly 40 percent of the country’s export earnings.
Sunflower field in Ukraine's Poltava region. Ukraine is one of the world’s major producers of sunflower oil. Source: Wiki Commons
These farms have been producing a large share of the world’s corn, wheat and sunflower seed — basic building blocks for today’s industrial food production. Although the war devastated farms and disrupted last year’s growing season, Ukrainian farmers still harvested many millions of tons of foodstuff. Before the war, Ukrainian corn accounted for as much as 80 percent of China’s imports of this vital commodity.

Commodity prices of corn, soy and sunflower seed are also very high and have fluctuated wildly over the course of the last year, and food processing companies have passed resulting risks on to consumers via higher retail prices. This acutely threatens food-insecure families in low-income countries in Africa and the Middle East, but it also contributes to food prices inflation in the US, where one in ten families are food insecure.

Before the war, virtually all of Ukraine’s agricultural products were exported via the Black Sea – a commercially and strategically important maritime passage. While Ukrainian farms have worked on alternative export routes since last year, it is very costly to shift significant amounts from sea to rail or road, and nearly impossible to export Ukraine’s harvest in its entirety.

Quite simply then, by halting Black Sea trade, Russia has tremendous leverage over Ukraine and basic household economies across the world.

Moscow had already negotiated a number of extremely important concessions in July of 2022 in return for allowing passage of Ukrainian grain.
The United States excluded trade in agricultural commodities and fertilizer from its embargo on Russia, and the EU modified financial sanctions to allow payment for these commodities.
Over the last 12 months, Russia repeatedly threatened to walk out of the BSGI. For much of 2022, the Kremlin expressed dissatisfaction with how food and fertilizer exports remain affected by the sanctions. Shipping companies, insurers and banks have shied from facilitating Russian trade.

This year, Russia has added further demands, including two that are particularly noteworthy.

Russia is demanding that the State Agricultural Bank (Rosselkhozbank) is exempt from sanctions, insisting that the bank is only engaged in facilitating food production and export. However, Rosselkhozbank’s chairman is Dmitry Patrushev (who also holds the post of the Minister of Agriculture), the son of Nikolai Patrushev, a prominent silovik known to have close ties to President Putin. Reports by the Economist and Source Material, an investigative journalism non-profit organization, have established that Rosselkhozbank is also financing an oil trading company and therefore helps buffer Russia’s energy sector from the impact of sanctions.

Russia is also demanding that Ukraine frees up an ammonia pipeline that Russia uses to export fertilizer from Togliatti to global markets via the port of Odesa. Ukraine has blocked the pipeline since February 2022, the beginning of Russia’s invasion. The pipeline was also damaged in an attack on June 2023, which Russia claims was perpetrated by Ukrainian forces. Russia is a leading exporter of ammonium fertilizer and the Russian Foreign Ministry has called the re-opening of the pipeline a “linchpin” of its demands for a renewal of the grain deal.

In essence, Russia is relying on the naval blockade to eliminate sanctions-related restrictions on its own abundant harvest and resources, allowing it to take advantage of tight global markets for grain and fertilizer. 

Pivotal role of Turkey for a new Grain deal

Ukraine and the world desperately need a new and lasting grain deal. Of course, Russia wields considerable clout in the negotiations, as its warships can block, or even destroy, grain-carrying commercial vessels. Turkey has played a critical role in bringing Russia to the negotiation table throughout the time the grain corridor agreement has been in operation.

Much of Turkey’s food security depends on imported wheat from Ukraine and Russia, and Recep Tayyip Erdoğan wants to stabilize grain prices. The same is true of Russia’s trade partners in Africa and the Middle East, but
Turkey is alone in its ability to extract concessions from Moscow.
In March 2023, the last time a BSGI term had expired,  Erdoğan was grappling with the aftermath of a devastating earthquake and was running for re-election in June, and was therefore clearly adamant that Russia continue its cooperation in the grain deal.

With its control of the Bosporus and Dardanelles, Turkey also has the final word about commercial and military vessels entering and exiting the Black Sea. Some of Russia’s oil, grain and an array of industrial commodities are exported via the Turkish straits. A 1936 international treaty, the Montreux Convention, obliges Turkey to allow free passage to all merchant vessels. Importantly, this convention distinguishes between war and peace. In times of war, or more precisely when Turkey considers itself under threat, the country is allowed to restrict trade.

Russia thus relies on Turkey’s cooperation for its own exports to reach the world market. This is, of course, a truth that Moscow has long been aware of; essentially the 21st century replay of Russia’s centuries-long struggle for access to the Mediterranean.

In early July Erdoğan met with Ukrainian President Ukraine President Volodymyr Zelenskiy and announced a visit by President Vladimir Putin in August. The one-month period between the two visits is curious and unprecedented, as Turkey’s previous diplomatic interventions were last-minute scrambles to find an agreement with Russia. Erdoğan may have allowed Russia a one-month period to maximize pressure on Ukraine and the West.

In the long run, though, Turkey will have a strong and vested interest to prevent Russia from weaponizing food and from escalating the stand-off between Ukraine and Russia in the Black Sea, as food insecurity is a threat to many Erdoğansupporters at home. If there is hope for a new Grain Deal, it is Turkey that can deliver one.
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