Complex negotiations to get grain out of Ukraine

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Paris (AFP)- Talks are progressing on opening shipping corridors to allow the 20 million tonnes of grain still stuck in Ukraine and upcoming harvests to be shipped around the world.

But even if a deal is struck, it will bring no immediate relief to importing countries.

Crucial negotiations

Negotiations have intensified since early June, with Turkey mediating between Russia and Ukraine, which together account for around 30% of the world’s crop trade.

The talks are crucial as no other country has so far shown itself able to fill the market shortfall of 25 million tonnes of Ukrainian grain initially. And the prices of agricultural raw materials were already high before Russia invaded Ukraine on February 24, in particular due to the post-Covid economic recovery.

The war caused the prices of cereals such as wheat and maize to soar to unsustainable levels for countries dependent on their imports, such as Egypt, Lebanon and Tunisia.

In recent weeks, prices have gradually fallen on the prospect of the next harvest, fears of recession and the progress of negotiations on maritime corridors.

Negotiations have accelerated in recent days: Turkey has indicated that an agreement in principle has been reached on the creation of a protected maritime corridor.

Russian President Vladimir Putin said “progress” had been made in talks before telling reporters that any deal hinged on the West’s willingness to give ground.

“We will facilitate the export of grain from Ukraine, but we assume that all restrictions on possible deliveries for the export of grain from Russia will be lifted,” he said.

However, market experts say that no sanctions directly target Russian agricultural products, but are nevertheless penalized by sanctions on the country’s banking sector.

– What is Turkey’s role? –

“There are only a handful of countries – Turkey being one, Qatar being another – that are able to talk to almost anyone and avoid a major backlash,” he said. Colin Clarke, Research Director of the US-based Soufan Group.

Turkish President Recep Tayyip Erdogan has “proved he can do it and that’s why he’s been a trusted broker not only to the Russians, but I think reluctantly to NATO countries – that’s the best they have,” said the expert.

Turkey had “a strong hand to play here,” Clarke continued.

“Erdogan plays the hero, he tells everyone that he is working to solve the global food crisis, but we know that Turkey is doing a lot to obstruct negotiations in other areas.

“They have their concerns and their priorities don’t always match the priorities of the international community, NATO priorities or even the priorities of their allies.”

What kind of deal?

Up to 90% of Ukraine’s wheat, corn and sunflower exports were transported by sea, mainly from the port of Odessa, which accounts for 60% of all port activity in the country.

Any deal to resume large-scale shipping will involve several steps: clearing Ukrainian-mined ports; the loading of ships, which could be placed under UN surveillance; inspection of shipments; and escorting boats, as required by Russia to ensure shipments do not contain weapons, said Edouard de Saint-Denis, trader at Plantureux et Associés.

Diplomatic sources, however, say full mine clearance is not necessary as safe transit routes remain within the measures to protect coastal areas from invasion.

A number of other points remain very controversial: if Moscow manages to control – or even seize – boats, will the controls be carried out in Ukrainian or international waters? Which ships will be allowed to carry cargo and what nationality will their crews be?

“Russians don’t want Ukrainians and vice versa,” de Saint-Denis said.

At one point Turkey suggested using its fleet, but a compromise could be found to use “flags of convenience”, according to a market watcher.

What are the consequences?

“In the very short term, an agreement would lower prices, but in terms of the flow of cereal shipments, nothing would change immediately,” said Edouard de Saint-Denis.

“It would take one or two months to clear the ports,” said the expert.

And loading areas should be renovated, especially in Odessa where part of the port administration was damaged in the fighting, he said.

Despite the various possible obstacles, the agricultural market analyst, Gautier Le Molgat, declared that it was now “in everyone’s interest that maritime traffic resume on the Black Sea: first for the Ukrainians, but also for the Russians, who have a bumper crop to export”.

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