Grain sources cast doubt on Black Sea grain initiative talks

Black Sea trade sources have cast doubt on rumors that talks are set to resume on the export grain initiative on October 5, with most arguing that there is little point to restoring the four-way agreement that allowed exports from Ukraine’s deep water ports of Odesa, Pivdenniy and Chornomorsk.

Rumors have been circulating among market participants that Russia could be poised to make a return to the grain deal initiative from October 5, after pulling out of the deal back in July 2023.

The deal had originally been signed between Ukraine, the United Nations and Turkey, with a mirror deal signed between Russia, the UN and Turkey, but was allowed to lapse when Russia declined to resign.

The trade rumors, most of which seem to come from Russia-based sources, expect Turkey will guarantee the safety of vessels operating in the Black Sea and, as such, will allow unhindered export of grains and sunflower from both Ukraine and Russia.

More controversially, the rumors also suggest a guarantee that the export of petrol, oil and lubricants from Russia would be included, in return for exports of the same products from the EU into three Ukrainian deep sea ports.

Also, key Russian demands for readmission to the international electronic banking system, SWIFT, and a guarantee of Russian fertilizer exports via Ukrainian ports has been dropped by Russian authorities amid acceptance that there is no possibility of implementing such an arrangement.

Along with that, it was also said that Turkey will process payments for Russian sunseeds and grains through its two state banks, with a 12% commission.

Doubts

However, trade sources spoken to by Fastmarkets Agriculture also suggested that such reports were untrue and claimed there is no reason or incentive for Ukraine to return to the grain deal and give control over the flow of exports back to Turkey, the UN and especially Russia.

Ukraine’s use of marine and aerial drones against Russian ports and shipping in the mainland and in the disputed territory of Crimea has proved a consistent irritant to Russian naval forces and spurred more confidence.

On the back of that, Ukraine declared the opening of its own humanitarian corridor – allowing a wider selection exports than simply grains – in August, initially enabling ships that had been stuck in port since the Russian invasion began to leave.

Since the opening of the humanitarian corridor, eleven vessels have already arrived in Ukraine, and eight of those have left successfully, but there are more expected to enter the region soon, but trade sources expressed fears that recommitting to the grains initiative could slow building momentum.

“The UN only will put the process into frames, which nobody really needs,” a source said.

Another Ukrainian source familiar with the matter said that for now there were only talks about the current humanitarian corridor, while the UN said that for now they could only confirm that negotiations are “ongoing”.

“The UN remains determined to ensure that Ukrainian grains can be exported and reach the global market, for the sake of Ukrainian farmers and the world’s poorest people who need affordable food. These efforts continue in that regard, including through talks with the Russian Federation,” UN representatives said in response to an official request from Fastmarkets.

Trade sources also agreed that it was possible that there be negotiations underway, but still did not expect a final result to be agreed upon and certainly not within the next 24 hours.

Along with that, Russian media RIA News reported that more clarity regarding the status and continuation of the grain deal initiative may appear closer to the end of 2023, but for now, there is no significant progress.

The grain deal initiative was stopped on July 17, 2023, after Russia withdrew from the deal – although significant delays at inspection stages meant that shipments were already significantly delayed – with some ships facing months of waiting at Istanbul.

That had brought accusations from Ukrainian authorities that Russian inspection teams under the Joint Coordination Centre were effectively sabotaging the arrangement by holding up their approvals for as long as possible.

But on August 10, Ukrainian naval forces opened a humanitarian corridor for commercial vessels, with few vessels that had been stuck since the Russian invasion leaving Ukrainian ports in August, before the arrival of eight vessels to load iron ore and grains in September.

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