A wartime deal that unlocked grain shipments from Ukraine and helped moderate rising global food prices will be extended for four months, the United Nations said on Thursday.
The deal extension is aimed at avoiding a price shock in some of the world’s most vulnerable countries, where many are struggling with hunger.
Ukraine’s President Volodymyr Zelenskyy called the 120-day extension a “key decision in the global fight against the food crisis.”
The agreement, reached during Russia’s war in Ukraine, establishes a secure Black Sea shipping corridor and inspection procedures to address concerns that cargo ships could carry weapons or launch attacks.
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Russian Defense Minister Sergei Shoigu and Ukrainian Infrastructure Minister Oleksandr Kubrakov signed separate agreements with UN Secretary General Antonio Guterres and Turkish Defense Minister Hulusi Akar. The ceremony was witnessed by Turkish President Recep Tayyip Erdogan.
“Today, there is a lighthouse in the Black Sea,” Guterres said. “A beacon of hope, a beacon of possibility, a beacon of relief in a world that needs it more than ever.”
Although Western sanctions against Russia over its invasion of Ukraine did not target food exports, many shipping and insurance companies were reluctant to deal with Moscow, either refusing to do so or raising the price sharply.
The United Nations has been working to overcome problems related to insurance, port access, financial transactions and shipments for Russian vessels, according to a UN official who was not authorized to speak publicly and spoke on condition of anonymity. The official said the insurance issue has been mostly resolved in the past few days.
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Ukraine and Russia are key global suppliers of wheat, barley, sunflower oil and other foods to countries in Africa, the Middle East and parts of Asia, where millions of impoverished people do not have enough to eat.
Russia was also the world’s leading exporter of fertilizers before the war. The loss of those supplies after Russia’s invasion of Ukraine on February 24 sent global food prices soaring and fueled concerns of a hunger crisis in poorer countries.
While the extension prevents a price shock in developing countries that spend far more on food and energy than richer countries, threats of drought in places like Somalia and weakening currencies around the world remain, which makes the purchase of imported grains more expensive.
“I welcome the agreement by all parties to continue the Black Sea Grain Initiative to facilitate safe export navigation of grain, food and fertilizer from Ukraine,” Guterres said in a statement.
Turkey’s Defense Ministry said the decision to extend the agreement came after two days of talks in Istanbul between delegations from Turkey, Russia, Ukraine and the UN that were held in a “positive and constructive” atmosphere.
Russia expressed its dissatisfaction with the deal facilitating Russian grain and fertilizer exports, hinting that it might not approve an extension and even briefly suspending its part of the deal late last month. She cited the risks to her ships following what she claimed was a Ukrainian drone attack on Russia’s Black Sea Fleet.
Guterres also said the UN was “fully committed to removing any remaining obstacles to exporting food and fertilizer from (Russia),” a part of the deal that Moscow sees as essential.
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Russia has offered to donate 260,000 metric tons of fertilizer stored in European ports to farmers in the developing world who have been locked out of the fertilizer market due to shortages, and the official said the first ship is scheduled to leave the Netherlands on Monday to Mozambique. , where the fertilizer will go overland to Malawi. More shipments are expected from Belgium and Estonia, the official said.
The Russian Foreign Ministry said Moscow had allowed the extension to take effect “without any change to the terms and scope.” He said Russia pointed to the “intensification” of UN efforts to speed up Russian exports.
“All these issues must be resolved within the 120 days for which the ‘comprehensive agreement’ is extended,” the ministry said.
During talks on the extension, the sides discussed possible additional measures to “deliver more grain to those who really need it,” the ministry added, apparently to address Russian complaints that most of the grain ended up in wealthier nations.
Turkish President Recep Tayyip Erdogan suggested on Thursday that Russia’s wheat could be made into flour in Turkey and shipped to African nations in need.
UN humanitarian chief Martin Griffiths said last month that 23% of Ukraine’s exports under the grain deal have gone to low- and lower-middle-income countries and 49% of all wheat shipments have been destined for those nations.
Markets were pleasantly surprised by the extension, said Ian Mitchell, co-director of the Europe program at the Center for Global Development who specializes in agriculture and food security. Following the announcement, wheat futures prices fell 2.6% in Chicago.
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“Ukraine and Russia are such important grain exporters that the rest of the market cannot completely replace the complete absence of Ukrainian grain,” he said. “So that deal will have significant significance for food prices, even if the volumes are not what they were before the invasion.”
However, he said that uncertainty is “useless in this deal.” Towards the end of the four-month extension, markets “will price in the risk that it hasn’t been extended, and prices will pick up a bit again.”
Arnaud Petit, executive director of the International Grains Council, said the Black Sea region produces some of the cheapest wheat in the world and securing those supplies avoids a price shock in developing nations.
There have been good harvests in the region, helping to expect 10 million more tons of wheat worldwide than last year, he said. The extension means Ukrainian farmers can plan to plant.
Petit called the extension a building block in “an unstable region where things can change on a daily basis.”
However, when it comes to food prices, the trade movement is not as important as currencies around the world are weakening against a strong US dollar, which is priced in commodities such as wheat and other grains. Petite said.
The council calculated that for Ghana, which mainly imports its wheat from Canada, the price of wheat in Canadian dollars has been fairly stable for two years. But switching to the local currency resulted in a 70% price increase.
World food prices fell about 15% from their March peak after the grain initiative was adopted in July.
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“With the delivery of more than 11 million tons of grain and food to those in need via approximately 500 ships in the last four months, the importance and benefits of this agreement for the world’s food supply and security have been become evident,” Turkey said. Erdoğan said.
Associated Press contributed to this post.