Istanbul, Riga Russia and Ukraine have agreed to extend the grain deal by at least 60 days. This was announced by Turkish President Recep Tayyip Erdogan on Saturday. The United Nations also confirmed the extension.
More than 800 ships had so far transported 25 million tons of grain under the agreement. But not only Ukraine has benefited from the deal so far. Russia is also using the agreement to its advantage. The Kremlin is willing to compromise, but uses the negotiations to assert its own interests.
“This is a kind of goodwill gesture by Russia in the hope that after such a long time, the conditions and commitments that certain sides have taken on will be fulfilled,” Kremlin spokesman Dmitry Peskov said on Tuesday, according to the Interfax news agency. But that is not the whole truth.
Both Ukraine and Russia are important suppliers of wheat, barley, sunflower oil and other foodstuffs to countries in Africa, the Middle East and parts of Asia. Before the war began, Russia was also the world’s largest exporter of fertilizers. The disruption of these supplies following the Russian invasion in February 2022 temporarily pushed up global food prices and fueled fears of a hunger crisis in poorer countries.
According to an analysis by the Carnegie Center “Endowment for International Peace”, a Washington-based think tank, Russia’s partners in the Middle East and North Africa already had a significant influence on the decision on the agreement in July 2022.
In addition, Syria, Egypt and China are among the recipients of the grain, which are officially or unofficially on Russia’s side in the Ukraine war or at least tolerate the Russian perspective.
Another incentive for Moscow to sign the deal was that opening up Ukraine’s ports will also remove obstacles to Russia’s own grain and fertilizer exports.
“The easing of sanctions to facilitate Russian agricultural exports was not officially part of the agreement, but was successfully negotiated in parallel with the United States and the European Union,” said the July Carnegie analysis. “One of Russia’s reasons for allowing grain exports is its desire to lift sanctions on its fertilizers,” added Ukrainian political scientist Volodymyr Fesenko.
Good deal for Russian companies
This is also the case now. Because in addition to the new grain deal, there was an agreement with Russia that was supposed to facilitate the export of Russian food and fertilizers.
Russian companies make a lot of money with it. In 2022, Russia’s fertilizer export earnings had actually increased, although the country was able to sell less – because prices were high. That made the deal worthwhile for Russia. It’s not just the Ukraine war that has caused grain prices to skyrocket, for example. The end of the corona pandemic also caused prices to surge. Even before the war broke out, grain prices were around 50 percent higher than in previous years. Prices are now back to pre-war levels.
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The deal is also worthwhile for the Kremlin because parts of agricultural production are closely linked to the government in Moscow. For example, the second largest Russian grain exporter, Demetra Holding, is partially owned by structures within the Marathon Group. This in turn belongs to Alexander Vinokurov, the son-in-law of Russian Foreign Minister Sergei Lavrov.
Another example is the company NI Tkachev. The company is owned by former Minister of Agriculture Alexander Tkachev. And the owners of meat producer Miratorg, the Linnik brothers, are associated with the wife of former President Dmitry Medvedev.
Several Russian banks have also benefited from the agreement so far, as their frozen assets were partially released by the EU to avoid delays in payment for agricultural imports. These banks include Bank Rossiya, owned by pro-Kremlin entrepreneurs Yury Kovalchuk and Nikolai Shamalov, and Promsvyazbank, the main bank in Russia’s defense sector.
Important imports are at stake for Moscow
According to a report by the Reuters news agency, Russia had already asked the EU in November to ease sanctions on transactions in non-sanctioned trade for the Russian Agricultural Bank in order to facilitate the delivery of grain and fertilizers to the world market.
Also known as Rosselkhozbank or RSHB, the bank is state-owned and was banned by Swift last June. It is not yet known whether the bank has received relief again.
According to official information, the harvest in 2022 went largely smoothly thanks to the grain deal – not only for Ukraine, but above all for Russia. The deal that has now been concluded not only ensures planning security for Ukraine’s grain exports – but also for Russia itself.
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