Rational grain: why Russia withdrew from the grain agreement and what to expect next?

A hustle around the grain agreement

Russian blackmail with an ostentatious exit from the "Black Sea Grain Initiative" and a much less pompous return to it obviously did not work.

Thanks to the principled position of Türkiye and the UN, the grain corridor continued its work in a trilateral format, while the successes of the Armed Forces ensured the "flexibility" of the Russian side in negotiations to restore its participation in the agreements.

Experts almost unanimously called it the epic failure of the "great strategist" Putin and the undeniable victory of the experienced diplomat - Erdoğan.

It is hard to argue with the latter.

The Turkish leader has once again demonstrated his character to Putin, his influence on the region, his ambitions to the West, and the benefits of a policy of neutrality in the Russian-Ukrainian war to the people of Türkiye, which is rapidly approaching the 2023 elections.

"Diplomacy of leaders", "A strong leader is a strong Türkiye", and "The eyes of the whole world are directed towards Ankara" - the Turkish mass media did not skimp on compliments, covering the negotiations surrounding the agreement.

The resonance surrounding the Turkish leader's successes was so powerful that some opposition commentators half-jokingly suggested that if this crisis did not exist, it would’ve been worth inventing it.

Although such statements are outright manipulations of the political opponents, the resumption of the grain corridor by President Erdoğan ahead of his meetings with NATO Secretary General Stoltenberg on November 4, the Swedish Prime Minister on November 8, and world leaders at the G-20 summit scheduled for a week after have certainly created a positive background for discussing those issues that Ankara is interested in solving.

On the other hand, the Russian president has a wild imagination when it comes to creating artificial crises.

And unlike the far-fetched pretext for shelling the Russian fleet in Sevastopol with the alleged use of the grain corridor by Ukrainians, the real reason for such a demarche should be sought not in the past, but in the future.

The grain agreement officially expires on November 19, and the shake-up of the situation on the eve of decisive negotiations may affect the positions of the parties when revising its terms. On one hand, Russia showed weakness by quickly agreeing to return to the Joint Coordination Center (JCC) with symbolic "security guarantees" from the Ukrainian authorities. On the other hand, with nothing to lose but reputation (frankly, not much of it left), the Kremlin has been allowed to talk about "goodwill gestures" to preserve the deal now, while demanding concessions from its partners on fundamental issues for Russia to continue work of grain corridors for the next year.

Therefore, the main risks, as well as the primary goal, of Russia's sudden exit and no less sudden return to the grain initiative may not be in the disruption of the agreements, but in their continuation. But on other, more favorable terms for the Kremlin.

Given that Ukraine may come under pressure from international partners this time, some of these risks should be considered separately.

1. There is no doubt that Russia will use every opportunity to renew its demands for expanding the export of its own (and appropriated Ukrainian) grain to international markets. It should be expected that Türkiye will support the Russian side in these calls. President Erdoğan has repeatedly mentioned the West's failure to fulfill its obligations to Russia, ignoring its interests, and the need to create conditions for the expansion of Russian grain and fertilizer exports, which is supposed to have a positive effect on world food prices. Both Minister of Foreign Affairs Çavuşoğlu and President's foreign policy adviser Ibrahim Kalin called Russia's demands "fair".

In addition to the desire to remain an "impartial arbiter" between Ukraine and Russia, Ankara's interest in restoring full-fledged trade with both countries is also explained by quite pragmatic interests. According to UN estimates, Türkiye supplies about 22% of annual grain imports from Russia and only 3% from Ukraine. The Turkish state usually covers its needs at the expense of its production, while most of the imported grain is re-exported. Therefore, the expansion of supplies of cereals and oil crops from the Russian Federation will automatically mean greater involvement of Türkiye in international logistics chains and trade in agricultural products.

The country has a well-developed processing industry: Türkiye ranks first in the world in flour exports and second in pasta exports, even though it imports most of its wheat from Russia (67%) and Ukraine (21%).

Against the background of the overall growth of Turkish imports from Russia by 213% and exports by 113% after the start of the full-scale Russian invasion of Ukraine, reaching the dream figure of $100 billion bilateral trade between Türkiye and the Russian Federation could become even closer due to an increase in grain supplies from Russia.

2. Although direct sanctions against Russian food were not imposed, the export of Russian grain is becoming more complicated because of the inability to carry out relevant banking operations. Russia is already seeking exemptions from sanctions for some state-owned banks to allow them to process payments for Russian grain and fertilizer delivered under the grain deal. In particular, it is about the need to loosen restrictions for the state agricultural creditor Rosselkhozbank. It is clear that if the West makes concessions in response to Putin's blackmail, the erosion of the sanctions regime will continue, gradually spreading to other sanctioned banks and operations to "satisfy humanitarian needs" outside of the grain agreement. Türkiye, which is not only interested in expanding Russian grain exports, but also traditionally categorically opposes any sanctions, does not hide its support for Moscow in this matter. Judging by the statements of high-ranking officials to the Turkish media, Ankara has promised to contribute to the solution of this issue, regularly raising it in dialogue with Western partners, in particular at the upcoming G-20 summit. For its part, the Russian Ministry of Finance very appropriately announced its readiness to include Türkiye in the list of "friendly countries" and to finally revise the outdated agreement on avoiding double taxation, which will significantly improve the conditions for Turkish business in Russia.

3. The access of Russian grain and fertilizer traders to the freight of ships, their insurance, and access to European ports remains a problem - and here Türkiye is also ready to help. Thus, in a recent interview for A Haber, the presidential spokesman, Ibrahim Kalin, stated that Russia rightly demands to resolve the issue that unblocks the export of Russian grain, fertilizers, and ammonia to world markets. In turn, Türkiye calls on the US to provide guarantees to insurance and logistics companies that they will not be subject to secondary sanctions if they cooperate with Russia. According to Kalin, he raised these issues at a meeting with the adviser to the US president, Jake Sullivan, and the country's leadership will continue to work in this direction.

4. Fertilizers and the main raw material for their production - ammonia also occupy an important place on the agenda of future negotiations on the grain agreement. And here we should expect pressure on Ukraine not only from Moscow but also Türkiye and the UN, which consider unblocking the export of ammonia and the production of fertilizers as one of the ways to alleviate the food crisis.

According to Economic Truth, before the war, the share of the Russian Federation in the world ammonia market was 20%. About half of these volumes were transported to the Ukrainian port "Pivdenny" through the "Tolyatti-Odesa" ammonia pipeline from the production facilities of "Tolyattiazot" of Dmitry Mazepin and "Mindobriva" of Arkady Rotenberg. Ammonia transit stopped on February 24, and in mid-October, both Rotenberg and Mazepin found themselves in the new sanctions package signed by President Zelensky. Among the restrictions imposed on oligarchs by the Ukrainian authorities is "partial or complete cessation of transit of resources."

Ukraine has repeatedly rejected the possibility of resuming the operation of the ammonia pipeline, which will undoubtedly be used not only to replenish the Russian budget by about 200 million dollars every month but will also turn into a chemical weapon in the hands of the aggressor country. However, the UN does not stop trying to agree with Kyiv on the restoration of ammonia transit to alleviate the food crisis and the crisis in the fertilizer market. Official Ankara also regularly raises this issue in dialogue with European and American partners.

5. The list of countries where grain should be exported along the grain corridor remains a separate issue. Currently, according to the statistics of the Joint Coordination Center of the Black Sea Grain Initiative, Spain (1.9 million tons), Türkiye (1.3 million tons), and China (1.1 million tons) are among the top three destination countries for dry cargo with grain. According to Amir Abdullah, the official coordinator from the UN, responsible for the implementation of the Initiative, Türkiye is one of the key countries that receive Ukrainian grain, although "in fact, a significant part of the food that comes to Türkiye will probably be processed and sent to the regions of Africa and Asia ".

At the same time, against the backdrop of anti-Western and anti-Ukrainian Russian propaganda, calls are increasingly being heard to define a list of "needy" countries to which grain should primarily go as part of the grain initiative. Recently, Putin even offered the Turkish president to send grain to poor African countries "for free". Erdoğan himself confirmed his intentions to help the people of Djibouti, Somalia, and Sudan.

So far, however, it is not clear what kind of grain we are talking about (Ukrainian, so-called "Russian" grain - de facto illegally exported from the occupied territories of Ukraine or some other grain, delivered within the framework of the UN World Food Program). But the associated potential risks for Ukraine are already obvious – the legitimization of Russia's illegal trade in stolen Ukrainian grain, the creation of conditions for the redistribution of export flows, and the loss of Ukraine's image in the "Global South" region, as well as in Türkiye itself, where, in the perception of many, Kyiv is "taking advantage" of the food crisis and "deepening the shortage of food and fertilizers", while Russia "helps poor countries in Africa to get grain gratuitously, i.e. for free".

6. By the way, the issue of carriers is also interesting. Commenting on the operation of the grain corridor after Russia's withdrawal from the SCC, Turkish Defense Minister Akar noted that "those ships that have already left Ukrainian ports and are at sea will continue their journey. There are also no problems with the departure of ships under the Turkish flag, they will continue to leave" from the ports.

Subsequently, Putin also confirmed the achievement of agreements with Türkiye regarding the rules that will apply if Russia again withdraws from the agreement: "We will in any case not prevent the supply of grain from the territory of Ukraine to the Republic of Türkiye, bearing in mind the neutrality of Türkiye in the conflict in general, and the possibilities of the grain processing industry of the Republic of Türkiye and the efforts of President Erdoğan to ensure the interests of the poorest countries." It can be assumed that guarantees of the supply of grain from Ukraine by the Turkish fleet under any conditions were one of the important conditions of Ankara's anti-crisis settlement.

7. Finally, one should take into account the "side effects" of the grain agreement in politics. In Türkiye, reaching an agreement between Ukraine and Russia (thanks to Ankara's mediation services) is seen as a demo version of the negotiation model for full-scale peace. The Minister of Defense has repeatedly stated that Türkiye considers the grain corridor not only as a transport artery but also as a "road to peace". Therefore, it is not only about the supply of grain, but also about the development of mechanisms to restore trust between the warring parties, which should demonstrate the possibility of resolving any conflict through dialogue and negotiations. In this sense, the grain agreement is considered by the Turkish side as the first step on the way to a ceasefire and peace with Russia, while the Joint Coordination Center is a potential platform for negotiations. It is not difficult to imagine that with the deepening of the global food crisis and the approaching presidential elections in Türkiye, this vision will be actively promoted not only in Ankara but also in many other "war-weary" capitals.

Is it worth mentioning that against the background of Russia's traditional tactic of "escalation for the sake of de-escalation" no one mentions plans to extend the grain agreement to Mykolaiv and other ports in southern Ukraine?

It turns out as in the old joke: "How to do someone good? - Do something bad, and then return the way it was."

Under such conditions, without diminishing the importance of the diplomatic efforts of Türkiye and the UN to preserve an agreement that is important for Ukraine, the euphoria surrounding "Putin's humiliation" and "our victory" is somewhat surprising. After all, the main winner according to the results of the first round was Türkiye. And the main battle of Ukraine is still ahead.