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Russia likely to extend Black Sea grain deal

Bloomberg Ship in Black Sea
The deal will automatically continue another 120 days unless Russia decides to pull out by Saturday.

Russia is expected to agree to extend a United Nations-brokered deal allowing exports of Ukrainian grain and other farm products from the Black Sea, ensuring a vital flow of foodstuffs to the world market.

Russia is likely to allow the deal to renew after its Nov. 19 expiration, according to four people familiar with the situation, all of whom spoke on condition of anonymity to discuss matters which aren’t yet public. They didn’t specify whether Russia would seek to add new conditions in return for the extension or any other details.

A spokesperson for the joint body administering the deal from Istanbul said there’s nothing to confirm or announce at this stage. Kremlin spokesman Dmitry Peskov said Russia will disclose its decision “in due time.”

Wheat futures fell as much as 2.1% in Chicago on the news, before paring losses to 1.3% as of 6:05 a.m. local time. 

Nov. 19 deadline

The original pact, struck in late July with Turkey and Ukraine, revived seaborne exports from Ukraine after Russia blockaded the country’s ports following its invasion. It was brokered by Turkey and the UN and signed for an initial 120 days, which are due to run out Saturday. The deal provides for an automatic extension for another 120 days unless one of the parties decides to pull out or modify it. 

In tandem with the original agreement, the UN pledged to help ensure unimpeded exports of Russian food and fertilizers. 

Russian Foreign Minister Sergei Lavrov, speaking after Group of 20 meetings in Bali, said the UN pledged that his government’s conditions for a deal would be met. Those include making sure Ukraine doesn’t use the export corridor for military purposes, enabling Russian grain and fertilizer shipments, allowing state-owned Rosselkhozbank to work in full, and “normal” insurance rates, he said. 

The UN cited written guarantees given by the US and the European Union that they would provide “signals” to companies involved in the trade they won’t face sanctions risks, Lavrov said.

President Vladimir Putin had complained that the deal didn’t do enough to ease exports of Russian grains and fertilizer, even though they aren’t subject to sanctions and shipment volumes rose. He also argued that the supplies from Ukraine weren’t going to the poorest countries, although the UN had said the goal of the agreement was to lower prices by boosting supplies to the global market. 

Ukraine has shipped more than 10 million tons of crops through the Black Sea since the deal came into force, led by corn and wheat cargoes. The grain has headed across Asia, Europe and Africa, including some cargoes chartered by the World Food Programme, the UN’s food-aid arm.

U.S. hopes 

Last month, Russia briefly suspended its participation the deal, but after the UN and Turkey vowed to continue anyway, resumed observing it. On Monday, Peskov, the Kremlin spokesman, said talks last week in Geneva with the UN on extending it were “rather constructive,” but declined to comment on whether the deal would continue.

Ukraine said earlier this month that it was optimistic the pact would be extended.

Russia’s grain exports have been accelerating amid a bumper crop, while Ukraine’s shipments had slowed due to uncertainty over whether the deal would be extended.

“We certainly hope that it will be renewed,” White House spokesman John Kirby told Bloomberg Television in an interview at the G-20 summit.

“We do welcome Turkey’s leadership with respect to the initiative in the first place and the efforts that Mr. Erdogan is putting forward to get it to be extended,” he said, referring to Turkey’s President Recep Tayyip Erdogan. “We are also grateful to the UN Secretary General’s leadership here as well.”

© 2022 Bloomberg L.P.

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