On the Cancelation of the Black Sea Grain Deal

After the Kremlin refused to continue the grain deal with Ukraine on July 17, the Russian Ministry of Defense announced that any ship under any flag going to the seaports of that country would be considered as a potential carrier of military aid, and the countries under whose flags these ships would sail would be considered as allies of Ukraine.

In fact, there are rules for conducting naval wars, defined by a number of conventions. These stipulate that merchant ships of countries not participating in the war may be stopped for inspection, otherwise they may be sunk, but passengers and crews in this case must be landed either on shore or on other ships. Mine warfare is also subject to conventional restrictions. Whether the Russian military will act strictly in the spirit (let alone the letter) of international law is an open question, since the argument that “we are not at war, but are engaged in a special operation” can be applied. But what works for the legally illiterate who watch Russian state TV does not affect international lawyers at all. The conventions do not provide for any “special operations.” Any military action at sea and any use of force is subject to conventions. Whether Russian warships are ready for such procedures is not clear, and so far there seem to be no such precedents.

And so, the Russian military could find itself branded with the honorary title of “pirates,” and then restrictions can begin to act against Russian ships and ships carrying Russian cargo everywhere around the world. And it doesn’t even matter whose flags they fly – any cargo originating from Russia will be subject to these measures.

Until the naval blockade issue is resolved, it will be possible to inflict maximum damage on the Ukrainian grain trade with air strikes. The destruction of the Crimean bridge may justify the declaration of these as “retaliatory strikes,” but even without any reason they would surely continue (this is not the first bombing of grain terminals in Odessa). The Ukrainian Ministry of Agrarian Policy reported that in the port of Chornomorsk about 60 thousand tons of grain were destroyed during these so-called retaliatory strikes. It is possible that the grain deal, albeit in a different guise, will soon be resumed, so the Kremlin is in a hurry to inflict as much damage on the competitor while it is still possible. The strike on the Crimean bridge turned out to be very timely to justify a new series of “retribution strikes,” right on the day on which it was needed.

The termination of the grain deal would create the possibility of a separate agreement between Ukraine and the Turkish military to escort convoys loaded with grain, and there is little to be gained in attacking convoys and thereby risking a military conflict with Turkey. Hence, the increased attacks on grain terminals. No grain – no convoys.

However, the Kremlin’s strategies have a very specific feature – they never include a plan “B” if something goes wrong. And in this case, a lot can go wrong – in fact, the destruction of grain is a blow not only to Kyiv, but also to the fortunes of Turkey, which benefits from the current deal. Not only is the deal terminated, but now the grain is also being destroyed, grain on which the Turks, with their very unimpressive financial history, can no longer profit from. In addition, these are strikes against the countries of the Middle East, which are in need of cheap grain. But of course, only few people think about them.

Where there is money, there are no friends, and bandits know this better than anyone. Therefore, further responses can be expected. And the more blows land on Erdogan’s pocket, the higher this probability. Turkey has many opportunities to do this, including but not limited to a direct response to Russia’s Black Sea Novorossiysk terminals. This was seen in Syria, and Libya, and Transcaucasia, and Central Asia. Even in the Volga region, Turkish influence is quite large, which should not be forgotten at all.

The Turkish leadership tried to show restraint until the last moment, hoping for an agreement with Russia. However, mediation is not working out very well, and the Kremlin’s actions, which directly inconvenience Turkish interests, may force the Turks to gradually shift their position. And not in a favorable direction for the Kremlin. Ankara has already threatened the first retaliatory strike – so far only the first. It must be understood that Turkey has not yet opened its arsenals on a large scale, and it remains the last NATO country that has kept aloof from events, positioning itself as a special country that can become a mediator in the conflict. If this changes, Ukraine will receive even more Bayraktar combat drones, and at the same time a lot of other weapons and ammunition. The Turkish Bayraktar in the Russian-Ukrainian conflict has not become the miracle weapon that it was in the Armenian-Azerbaijani conflict. But quantity matters: 180 new Bayraktars, in addition to other related cargo – this can make a difference. There will just be too many of them. And this cannot but affect the fighting.

In the meantime, the cost of September wheat futures on the Chicago Mercantile Exchange rose by more than 10% in the days after the cancellation of the grain deal. It is unlikely that the rise in wheat prices will be dramatic, but if Russia and Ukraine mutually nullify or significantly reduce their export potentials, then the 4 leading exporters – the USA, Canada, Australia and France – will be the main beneficiaries. All four countries have approximately 43-45 percent of the entire world wheat market. Russia and Ukraine together can claim about 24 percent.

That 24 percent can go under the hammer – the leading four will simply divide a significant part of the Russian and Ukrainian markets among themselves and will do everything possible to maintain that new position. True, about half of the Russian-Ukrainian market is in on rather poor countries, aimed at cheap wheat varieties and low transportation prices.

For comparison: in 2021, the average price of American exports was $303 per ton, Russian – $270, Ukrainian – $243 per ton. Canadian grain cost an average of $307 per ton on the foreign market. However, in the event of mutual nullification of the export potentials of Russia and Ukraine (or rather, their significant reduction), prices will rise in any case, and the excess profits of the Quartet exporters will increase both due to additional volumes and market shares, and due to an increase in prices. The “Four” may well in the future graciously leave this share to Ukraine and Russia, since they have already received the benefits from the collapse of the grain deal.

We have here a perfect analogy with the European gas market, where the Russian share was divided between the United States and Norway, and Qatar bit off a little. Prices stabilized, but for this the Europeans had to significantly reduce consumption. With wheat, it will be much more difficult to reduce consumption, especially in countries where bread is the basis of nutrition – the same Middle East and Africa.

And for Russian exporters, there remains only one other option, that of the notorious “turn to the East.” In other words, bow down to China and generally accept any conditions that the leadership of the Celestial Empire wishes to put forward. China is quite rationally using the critical problems of the Kremlin for leverage, correctly observing that it has nowhere else to turn. Therefore, it is quite normal that a partner who finds himself in a difficult situation will suffer a twisted arm, and will have his goods taken cheap.

Nothing personal, it’s just business.

This first appeared on Russian Dissident.

Anatoly Nesmiyan (El Murid) is a widely-read Russian blogger.