Russia Threatens to Exit Black Sea Grain Deal Over Fertilizer Exports

Image courtesy UN WFP

Published Oct 13, 2022 5:46 PM by The Maritime Executive

Russia is prepared to quit the Black Sea grain deal if its concerns about its own agricultural exports are not addressed, Moscow's ambassador to the UN in Geneva told Reuters Thursday. 

Gennady Gatilov, Russia's permanent representative to UN offices in Geneva, told Reuters that "there is a possibility" the Kremlin may withdraw from the deal if it does not see improvements in the quantity of Russian grain and fertilizer sold. Russia's agricultural products are not sanctioned, and the United States Treasury has issued a formal letter supporting Russian grain exports to reduce global food prices. The EU has isued a similar letter of clarification for grain and fertilizer shipments.

Russia is the largest exporter of nitrate fertilizer, thanks to its abundant supplies of natural gas. Last month, U.N. trade chief Rebeca Grynspan said that Russian fertilizer exports remained depressed despite the Black Sea grain deal, and that they would need to be increased in order to ensure a good yield from the next planting season. Obtaining trade financing for Russian fertilizer shipments has been difficult, Western traders report, because banks are still uncertain about the legalities of doing business with Russia in any category. 

Russia has limited its own fertilizer exports to protect domestic farmers from rising prices, but its actual sales are falling even below the domestically-imposed quota.

Given Russia's ongoing troubles in the agricultural export market, Gatilov told Reuters that “there is a possibility" of Moscow exiting the Black Sea Grain Initiative when it is up for renewal next month. "We are not against deliveries of grains but this deal should be equal, it should be fair and fairly implemented by all sides," he sad.

The UN officials charged with implementing the agreement say that the main challenge for expediting Russia's agricultural exports is educational: it takes time to explain to private-sector market actors that they can do business in this specific trade without fear of sanctions. 

"We have made important progress . . . but there are issues still to be resolved in insurance, finance and shipping," said Grynspan in a press conference Thursday. "No doubt, the market showed a chilling effect from the private sector [due to sanctions]. So this is a process that we are working on . . . and we will continue doing so."