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The Expired Agricultural Deal Between Ukraine and Russia Could Have Global Impact
Background on the Agricultural Deal
A landmark agricultural deal between Ukraine and Russia is set to expire, which could have serious global repercussions if the agreement is not renewed. Prior to the Russian invasion of Ukraine in 2022, both countries accounted for a significant portion of global grain exports. However, these shipments came to a halt until the Black Sea Grain Initiative was established, which reopened three key Ukrainian ports. Under the deal, over 1,000 ships carrying 33 million metric tons of agricultural products have departed from Ukraine's ports. The agreement has also facilitated the transportation of wheat to food-insecure countries through the World Food Program. However, there have been recent delays and no new vessels approved to depart Ukraine.
Russian Demands and Threats
Russia has threatened not to renew the agreement unless it incorporates fertilizer products and a pipeline resumption. Russian Foreign Minister Sergey Lavrov argued that the original agreement included both grain and fertilizer exports. Moscow has also demanded the return of the Russian Agricultural Bank to the SWIFT banking system. The exclusion of Russia from SWIFT following the invasion severed the country from global financial networks. These demands and threats from Russia have raised concerns about the future of the agricultural deal.
Potential Global Fallout
If the agricultural deal between Ukraine and Russia is not renewed, there could be significant global consequences. The halt in grain exports could result in higher food prices and increased food insecurity in many countries that rely on imports. Moreover, the lack of fertilizer exports could impact crop yields and agricultural productivity worldwide. The expiration of the agreement could also indicate worsening relations between Ukraine and Russia, raising concerns about broader geopolitical implications. It remains to be seen whether the deal will be renewed or if alternative solutions will be explored.
Efforts to Salvage the Deal
Efforts are underway to salvage the agricultural deal between Ukraine and Russia. UN Secretary-General Antonio Guterres has sent a letter to Russian President Vladimir Putin outlining proposals to renew the agreement. Conversations between the UN and the Kremlin via Signal and WhatsApp are ongoing. However, Moscow maintains that the current agreement only supports Ukrainian agricultural products and not Russian fertilizer exports. The outcome of these negotiations will be critical for the future of global food security and stability.
Potential Impact on a New Business
The expiration of the agricultural deal between Ukraine and Russia could have significant implications for a new business operating in the global food industry. If the agreement is not renewed, the halt in grain exports from Ukraine could lead to higher food prices and increased food insecurity in countries that heavily rely on imports. This could create challenges for a new business seeking to enter the market and disrupt supply chains, potentially affecting pricing, availability, and profitability.
Additionally, the lack of fertilizer exports as demanded by Russia could impact crop yields and agricultural productivity worldwide. This can pose a challenge for a new business that relies on stable and sufficient supplies of fertilizers for its operations. Fluctuating availability or increased prices of fertilizers could disrupt production processes and hinder overall business performance.
Furthermore, the potential worsening of relations between Ukraine and Russia raises concerns about broader geopolitical implications. Any escalation of tensions could lead to trade disruptions, sanctions, or political instability, affecting the overall business environment and creating uncertainty for a new company.
It is crucial for a new business to closely monitor the developments and negotiations surrounding the renewal of the agricultural deal. Adapting to potential changes in supply chains, exploring alternative sourcing options, and maintaining flexibility in pricing and operations could be essential strategies to mitigate the impact of these geopolitical uncertainties.
Article First Published at: https://www.cnbc.com/2023/07/15/black-sea-grain-deal-is-set-to-expire-on-monday.html
