Russia halts grain export agreement

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LONDON — Russia on Monday halted a breakthrough wartime deal that allowed grain to flow from Ukraine to countries in Africa, the Middle East and Asia where hunger is a growing threat and high food prices have pushed more people into poverty.

Kremlin spokesman Dmitry Peskov said the Black Sea Grain Initiative would be suspended until demands to get Russian food and fertilizer to the world are met. An attack Monday on a bridge connecting the Crimean Peninsula to Russia was not a factor in the decision, he said.

"When the part of the Black Sea deal related to Russia is implemented, Russia will immediately return to the implementation of the deal," Peskov said.

Russian representatives at the operation center for the initiative were more definitive, calling the decision "a termination," according to a note obtained by The Associated Press. Russia has complained that restrictions on shipping and insurance have hampered its agricultural exports, but it has shipped record amounts of wheat since last year.

The suspension marks the end of an accord that the U.N. and Turkey brokered last summer to allow shipments of food from the Black Sea region after Russia's invasion of its neighbor worsened a global food crisis. The initiative is credited with helping reduce soaring prices of wheat, vegetable oil and other global food commodities.

Russia has repeatedly complained about the agreement, which it calls one-sided in Ukraine's favor. Moscow has said that Western sanctions, imposed because of Moscow's devastating war, have restricted the sale of Russia's agricultural products, and Moscow has sought guarantees that free up those exports.

In April, Russia's Foreign Ministry also listed other demands to renew the grain deal: Reconnect the state-owned Russian Agricultural Bank to the international SWIFT messaging service that is critical for cross-border payments; lift restrictions on maritime insurance and on the supply of spare parts used in agricultural machinery; end sanctions against fertilizer companies and the people linked to them; and restore an ammonia pipeline that crosses Ukraine.

Ukraine and Russia are both major global suppliers of wheat, barley, sunflower oil and other food that developing nations rely on.

The suspension of the deal sent wheat prices up about 3% in Chicago trading, to $6.81 a bushel, which is still about half what they were at last year's peak. Prices fell later in the day.

Some analysts don't expect more than a temporary bump in food staples traded on global markets because countries such as Russia and Brazil have ratcheted up wheat and corn exports. But food insecurity worldwide and prices at local stores and markets have risen as developing countries also struggle with climate change, conflict and economic crises. Finding suppliers outside Ukraine that are farther away also could raise costs, analysts say.

The grain deal provided guarantees that ships would not be attacked entering and leaving Ukrainian ports, while a separate agreement facilitated the movement of Russian food and fertilizer. Western sanctions do not apply to Moscow's agricultural shipments, but some companies may be wary of doing business with Russia.

Ukrainian President Volodymyr Zelenskyy said he wanted to keep the initiative going even without Russia's safety assurances for ships.

"We are not afraid," he said, adding that shipping companies told him "everyone is ready to continue supplying grain" if Ukraine and Turkey were on board.

The Russian Foreign Ministry again declared the northwestern Black Sea area "temporarily dangerous." Sergei Markov, a Moscow-based pro-Kremlin political analyst, speculated that if Ukraine doesn't heed the warnings, Russia could strike Ukrainian ports or place mines in shipping routes.

The Black Sea Grain Initiative has allowed three Ukrainian ports to export 36.3 million tons of grain and other food to the world, according to the Joint Coordination Center in Istanbul.

Russia has repeatedly complained that the deal largely benefits richer nations. JCC data shows that 57% of the grain from Ukraine went to developing nations, with the top destination being China, which received nearly a quarter of the food.

U.N. Secretary-General Antonio Guterres said the end of the deal will result in more human suffering but that the U.N. would keep working to ensure the flow of supplies from Ukraine and Russia.

"There is simply too much at stake in a hungry and hurting world," Guterres told reporters.

Ukraine can still export by land or river through Europe, but those routes have a lower capacity and have stirred divisions among its neighbors.

In a post late Monday on his Telegram channel, Zelenskyy said he and Guterres agreed "to work together and with the responsible states" to restore food supplies via the Black Sea.

U.S. Secretary of State Antony Blinken told reporters at the State Department on Monday: "I hope that every country is watching this very closely. They will see that Russia is responsible for denying food to people who are desperately needy around the world."

John Kirby, a spokesperson for the U.S. National Security Council, called Russia's move a "military act of aggression" and said that the United States was already seeing a rise in global wheat, corn and soybean prices.

"We urge the government of Russia to immediately reverse its decision," he added.

Russia's decision appears to be part of a broader effort by Putin to reassert an aura of unassailable authority after a failed mutiny by the Wagner mercenary group, said Timothy Ash, a senior strategist at BlueBay Asset Management in London and an expert on Russia and Ukraine.

"It will hurt specific countries dependent on these exports," Ash said. But beyond that, "it shows how weak Putin is after the Wagner coup: He is now desperate to take any bit of leverage he can."

Turkish President Recep Tayyip Erdogan said officials were talking with Russia and that he hoped the deal would be extended.

The agreement was renewed for 60 days in May, but the amount of grain and number of vessels departing Ukraine have plunged, with Russia accused of preventing new ships from participating since June 27. The last ship left Ukraine on Sunday and was inspected Monday.

With Black Sea ports closed again, Ukraine may have to redouble its use of alternative routes, exporting grain by truck, train and river barge — journeys that take a longer time than shipping by sea, and cannot handle the same volume.

Blinken said that the United States would help Ukraine find other means of export, but that "it's really hard to replace what's now being lost as a result of Russia weaponizing food."

The war in Ukraine sent food commodity prices to record highs last year and contributed to a global food crisis, which was also tied to other conflicts, the fallout from the pandemic and climate factors.

High grain prices in countries like Egypt, Lebanon and Nigeria exacerbated economic challenges and helped push millions more people into poverty or food insecurity.

Rising food prices affect people in developing countries disproportionately, because they spend more of their money on meals. Poorer nations that depend on imported food priced in dollars also are spending more as their currencies weaken and they are forced to import more because of climate change.

Under the deal, prices for wheat and other commodities have fallen, but food was already expensive before the war in Ukraine, and the relief hasn't trickled down to kitchen tables.

"Countries such as Sudan, Somalia, Ethiopia are dependent on food imports from Ukraine, so it does hamper availability and accessibility to food," said Shashwat Saraf, the International Rescue Committee's regional emergency director for East Africa.

Now, it's key to watch whether Russia "weaponizes" its wheat exports, said Simon Evenett, professor of international trade and economic development at the University of St. Gallen in Switzerland.

The collapse of the grain deal dominated the U.N. Security Council's session on Ukraine on Monday. China, an ally of Russia's, stopped short of directly condemning Russia for withdrawing from the deal but called on both sides to resume negotiations to restore the pact.

Guterres said earlier that to help meet Russia's demands, he had sent Putin proposals to "remove hurdles" affecting its financial transactions. He said the United Nations had proposed enabling a subsidiary of the Russian Agricultural Bank — one of several institutions barred by Western sanctions from SWIFT because of Russia's aggression — to regain access with the European Commission, and that the agency had built a bespoke payment mechanism outside of SWIFT for the bank through JPMorgan.

U.N. spokesperson Stéphane Dujarric said that Russia's response to the letter apparently came in the form of Monday's announcement. Guterres said, however, that the U.N. intended to start negotiating a new grain proposal with Putin.

As the world's current largest wheat supplier, Russia could hike its export taxes, which "would raise world grain prices as well as allow Russia to finance more of its military campaign in Ukraine," Evenett said. He noted that Moscow already raised them slightly this month.

The grain deal has faced setbacks since it was brokered. Russia pulled out briefly in November before rejoining and extending the deal.

In March and May, Russia would only renew for two months, instead of the usual four. Joint inspections meant to ensure vessels carry only grain and not weapons have slowed considerably.

The amount of grain shipped per month has fallen from a peak of 4.6 million tons in October to over 2.2 million tons in June.

Meanwhile, Russia's wheat shipments hit all-time highs following a large harvest. The country exported 50.2 million tons in the 2022-2023 trade year, with another record of 52.4 million tons expected in 2023-2024, according to U.S. Department of Agriculture estimates.

Information for this article was contributed by Courtney Bonnell, Hanna Arhirova, Edith M. Lederer and Andrew Wilks of The Associated Press and by Matthew Mpoke Bigg, Ivan Nechepurenko, Liz Alderman and Farnaz Fassihi of The New York Times.

In this photo released by United Nations, a U.N. official of the Joint Coordination Centre carries out an inspection on board of the bulk cargo ship TQ Samsun, which traveled from Odessa, Ukraine, loaded with grain, while is anchored in the Black Sea, near the entrance of the Bosphorus Strait in Istanbul, Turkey, Monday, July 17, 2023. Russia on Monday halted a breakthrough wartime deal that allowed grain to flow from Ukraine to countries in Africa, the Middle East and Asia where hunger is a growing threat and high food prices have pushed more people into poverty. (United Nations via AP)
FILE – Storks walk in front of harvesters in a wheat field in the village of Zghurivka, Ukraine, on Aug. 9, 2022. Russia said Monday July 17, 2023 it has halted an unprecedented wartime deal that allows grain to flow from Ukraine to countries in Africa, the Middle East and Asia where hunger is a growing threat and high food prices have pushed more people into poverty. (AP Photo/Efrem Lukatsky, File)
In this photo released by the United Nations, a U.N. official of the Joint Coordination Centre carries out an inspection on board of the bulk cargo ship TQ Samsun, which traveled from Odessa, Ukraine, loaded with grain, while is anchored in the Black Sea, near the entrance of the Bosphorus Strait in Istanbul, Turkey, Monday, July 17, 2023. Russia on Monday halted a breakthrough wartime deal that allowed grain to flow from Ukraine to countries in Africa, the Middle East and Asia where hunger is a growing threat and high food prices have pushed more people into poverty. (United Nations via AP)