Russia’s move to terminate the deal, which has enabled nearly 33 million tonnes of grain to be exported through the Black Sea via ‘Solidarity Lanes’ since last July, will send global food prices spiralling, experts warn, with dire consequences for some of the world’s most vulnerable countries.
A High Representative speaking on behalf of the European Union, said that the block condemned unequivocally Russia’s decision which, it said, would further exacerbate the global food security crisis created by its war of aggression against Ukraine and its blockade of the country’s ports.
“Russia must cease illegally blocking Ukrainian sea ports and allow freedom of navigation on the Black Sea,” the statement read.
Many of the cargoes shipped since the BSGI was agreed last July have been shipped on vessels chartered by the World Food Programme (WFP). The cargoes, 725,000 tonnes in total, have supported its operations in countries including Afghanistan, Ethiopia, Kenya, Sudan, Somalia, and Yemen.
Ukraine supplied more than half of the WFP’s global wheat grain procurement through 2022. The BSGI also led to rapidly declining food prices in the months following its introduction, leading to a 23% fall in the Food Price Index of the UN Food and Agriculture Organization from March 2022 peaks.
Now, Ukraine faces limited and significantly more expensive export options. This will inevitably drive-up world grain prices, exacerbating already rampant global food inflation.
Options include shipments by the River Danube and transfer to ships in Romania’s Constanta Port which has handled a third or Ukraine’ grain exports since Russia’s invasion, according to reports. Other export possibilities are routes by land to the west. Both options are substantially more expensive than ocean shipments via the Black Sea and the Bosphorus.
In a recent report, shipbroker Simpson Spence Young (SSY) assessed the possible impact on the world’s grain trades. Canada, Russia, US could be marginal suppliers of wheat, the firm said; Argentina and Brazil for corn. This would probably lead to an increase in tonne-miles to markets in Africa, the Middle East, and Asia.
However, the broker said this might be partially offset by faster transits not affected by the delays and inefficiencies of the BSGI. At the end of 2022, ship agents reported waiting times for Joint Coordination Centre inspections of vessels engaged in the Black Sea trade of two weeks for laden vessels and 8-12 days for ships in ballast, SSY said.
“As these vessels will now be employed in a more efficient trade, effectively increasing fleet supply, we do not expect a substantial net effect on market fundamentals,” the firm stated.
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