Global Effects Due to Breakdown Of Russian – Ukraine Grain Deal

EARLIER this week Russia took the decision not to extend the Ukraine grain deal, how will this affect countries like Spain, and the rest of the world?

On Monday, July 17, The Kremlin announced that it had suspended the Ukraine grain deal, an agreement that had been in force for a year, writes 20 Minutos, Wednesday, July 19.

While Moscow blames Ukraine for not sticking to its part of the deal, Kyiv says Russia is at fault because its demands for the removal of sanctions had gone unheeded. The breakdown of the deal has consequences for the whole world because Ukraine is considered the breadbasket of the world.

The agreement between Ukraine and Russia was negotiated by Turkey and the United Nations. Since it was agreed in July 2022 it has been renewed three times. The deal allowed Kyiv safe passage to export grain across the Black Sea to Turkey’s Bosphorus Strait.

Shortly after Russia’s invasion, President Zelensky urged the international community to act and end the Russian blockade of Ukraine’s ports as the threat of a global food crisis was very real. Sixty-five per cent of Ukraine’s territory is devoted to agriculture and 64 per cent of its wheat is destined for developing countries.

Even before hostilities began, the threat of war had impacted food prices. Four months into the invasion and world food prices had risen by 17 per cent and 21 per cent for grains.

According to the UN World Food Programme report, Ukrainian grain feeds 400 million people worldwide, with a particular impact on Africa and the Middle East. Zelensky called on the international community to intervene to allow wheat shipments and avoid a global food crisis.

In 2021, Ukraine accounted for 10 per cent of the world wheat market, 15 per cent of maize and 13 per cent of barley. It was also the largest producer in the sunflower oil market with more than 50 per cent of world trade. Failure of a major exporter like Ukraine could have a serious impact on global food security.

The end of the agreement announced on Monday, means that Ukraine will not be able to send shipments through the Black Sea safely and securely. Since the ships transporting the grain could be attacked, no shipping company will take the risk of shipping it. Doing it by rail is ruled out because the price would increase and the transportation would no longer be profitable.

Following the announcement on Monday, the price of wheat and maize on world commodity markets has already started to rise. On the Chicago Board of Trade, wheat futures rose 2.7 per cent and corn futures rose 0.94 per cent, as traders feared imminent supply shortages of these staples.