ISTANBUL, TURKEY – As several grain ships continued to set sail from Ukraine’s Black Sea port on Nov. 1, three days after Russia announced it was suspending its participation in the United Nations-brokered grain export deal with Ukraine, questions about the long-term viability of the agreement remain unanswered.

Russia announced its suspension from the agreement on Oct. 29 after it claimed that Ukraine, “with the participation of United Kingdom experts,” executed drone attacks on the Crimean city of Sevastopol, including a Russian warship. Ukraine officials have denied any connection to the attack.

The grain export deal, which was brokered by the United Nations and Turkey in late July, has allowed the shipment of more than 9 million tonnes of grain and other food exports during the past three months. Prior to the deal, Russia, which invaded Ukraine on Feb. 24, had used a naval blockade to prevent the ships from leaving the Black Sea ports.

With Russia suspending its participation in the deal, there are growing concerns about whether vessels carrying Ukrainian grain will receive safe passage.

Lloyd’s of London insurer Ascot told Reuters on Oct. 31 it was suspending writing cover for new shipments using the Ukrainian grains corridor in the Black Sea until it has more clarity about the situation there.

"From today, we are pausing on quoting new shipments until we better understand the situation,” Ascot head of cargo Chris McGill told Reuters. "Insurance that has already been issued still stands." 

Ascot and broker Marsh launched a facility for grain traders in late July to provide up to $50 million in cargo cover for every voyage. The cargo facility, whose underwriting risk has been shared by a number of syndicates in the Lloyd's market, has been used by a significant proportion of the shipments to date, according to Reuters

"Any shipments that were quoted last week are valid for seven days. However, we had seen a drop off in submissions last week," McGill told Reuters.

Russian President Vladimir Putin, speaking at a news conference on Oct. 31, explained that Russia was pausing its participation in the agreement, saying it was up to Ukraine to guarantee the safety of the grain corridor.

 “We are not saying that we are stopping our participation in this operation,” Putin said. “We are saying that we are pausing it.”

The grain export deal was set to expire on Nov. 19, but efforts were already underway to extend the deal. Negotiators from Turkey and the United Nations said they are working to bring Russia back into the agreement.

“The secretary-general is deeply concerned about the ongoing situation regarding the Black Sea Grain Initiative,” said Stéphane Dujarric, spokesman for Antonio Guterres, the secretary-general of the United Nations. “The secretary-general continues to engage in intense contacts aiming at the end of the Russian suspension of its participation in the Black Sea Grain Initiative. The same engagement also aims at the renewal and full implementation of the initiative to facilitate exports of food and fertilizer from Ukraine, as well as removing the remaining obstacles to the exports of Russian food and fertilizer.”

Although the grain deal has enabled Ukraine to export more than 9 million tonnes of grains and other food products during the last three months, the war has taken an enormous toll on its ability to export and produce grain. A perennial top-five exporter of wheat and corn, Ukraine is projected to produce only 20.5 million tonnes of wheat in the 2022-23 marketing year, according to the US Department of Agriculture’s Foreign Agricultural Service (FAS), which would be the smallest crop in 10 years. It is forecast to export 11 million tonnes, which will be revised downward if Russia reinstates its naval blockade. If realized, it would be the lowest wheat export total since 2013-14. Its corn export totals are also expected to be significantly lower in 2022-23.

A report published Oct. 20 by the United Nations Conference on Trade and Development, highlighted the impact of the agreement, noting the initiative doubled the amount of wheat shipped to least-developed countries (LDCs) between August and September — about half a million tonnes. But wheat exports to LDCs between January and September 2022 totaled less than 1 million tonnes. This implies an export gap of 1.2 million tonnes with respect to 2021.

The initiative has helped to make grain more available and eased pressure on food prices, according to the report. This helped to improve global access to food, particularly for the poorest and most vulnerable nations. The report went on to note that prices were rising amid concerns the initiative would not be renewed in November.

Anthony J. Blinken, Secretary of State for the United States, said Russia is weaponizing food.

“Any act by Russia to disrupt these critical grain exports is essentially a statement that people and families around the world should pay more for food or go hungry, Blinken said. “ In suspending this arrangement, Russia is again weaponizing food in the war it started, directly impacting low- and middle-income countries and global food prices, and exacerbating already dire humanitarian crises and food insecurity.”