Grainless Russia: pulling out of the Black Sea Grain Deal to underline Putin’s decline

The Black Sea Grain Deal, signed on July 22, 2022, aimed to unblock Ukrainian ports for grain and agricultural product exports and, in turn, lift restrictions on Russian agricultural and fertilizer exports. Russia tried to use it as a center of its foreign policy leveraging tactics after the gas blackmail failed. However, the ongoing war in Ukraine has exposed the limitations of Russian diplomacy, with Western powers refusing to succumb to its threats. Now that Russia left the deal, it is essential to understand its three dimensions: economic, political, and legal, and the consequences for the Russian-Ukraine war, if any.

Economic Dimension:

Signing the Deal in July 2022, Russia aimed to promote its agricultural and fertilizer exports, and Ukraine benefited from export opportunities for its grain and other products. While it was touted as a mutually beneficial economic initiative, Russia seems to have failed to achieve its direct economic goals from the Deal. Putin’s crucial demands for the Deal were the Togliatti-Odessa ammonia pipeline and reconnecting Rosselkhozbank to SWIFT. However, both projects face uncertain prospects for quick restoration. The economic motivations behind the deal seemed evident as they revolved around money, trade, and the economic interests of the involved countries.

While the deal appeared economically advantageous, its slogans of preventing world hunger and stabilizing prices masked its true nature, which was primarily driven by economic interests. According to the UN the Black Sea Deal allowed to export 32.9M metric tons of different types of grain from Ukraine. While we hear a lot about wheat half of the exported grain was corn (16.9M tons of corn exports vs. 8.9M of exported wheat). The corn futures prices were high enough in 2021 and 2022, so the war in Ukraine did not affect them.

The DB Commodity index shows a strong upward trend since 2020, with COVID-19 money printing, inflation, and supply chain disruptions being the main reasons. The chart shows that the DB Commodity index was on the rise before the Russian aggression. The war contributed to it, especially in the beginning, but we can not solely blame the war for it.

As for the hunger battling narrative the UN database shows that most of the grain went to China (8M), Spain (6M), and Turkey (3.2M); significantly more than such needy countries as Ethiopia (282.8K), Yemen (259.6K), and Iraq (146.6K).

Despite the political hype around the deal, its core motivation lies in economic and political interests. The deal was about money and trade, but not a solution to prevent world hunger or rising prices. Despite all the political disagreements and deaths behind them, Russia maintains economic cooperation with Ukraine and the West. According to Washington Post Russia still pays Ukraine from $1 to $1.5 billion annually for oil transit to the EU through Ukraine. 

Grain exports gave Ukraine up to $500 million monthly. Russia was also interested in receiving hard cash for export via the Deal. Turkey is one of the main economic beneficiaries as it imports grain from Ukraine, then processes it and exports flour making 25% profit. This is why when the Black Sea Deal was halted in October 2022 Turkey played a key role in renewing it. Various economic interests of countries involved in the Deal allow us to view Russia’s withdrawal as part of bargaining for economic preferences.

Political Dimension:

The political dimension of the Black Sea Grain Deal is characterized by Russia’s use of threats and foreign policy leverage in negotiations. Russia repeatedly used the threat of withdrawing from the deal as a tactic to achieve its objectives. The war in Ukraine has shown the limitations and ineffectiveness of Russian diplomacy, rendering such threats unsuccessful. Since the only Russian foreign policy is raising the stakes Russia did it leaving the Black Sea Deal.

The involvement of Turkey as a mediator in the deal adds a diplomatic layer to the political aspect. Turkey’s interests lie in securing a market and political points through the deal, making it a significant player in the region’s politics. China is another significant political actor in the Deal receiving most of the grain. Both Turkey and China are Russian main indirect political allies, allowing for grey import of highly needed technological appliances and acting as money hubs in the situation of monetary isolation. 

It is important to accentuate the role of media and public perception in shaping the political landscape around the deal. Political cries and emotions have led to distorted perceptions of the deal, making it essential to understand the deal’s political implications beyond slogans and emotions. Besides economic benefits, the very existence of the Black Sea Deal indicated that both Russia and Ukraine could negotiate to try to find diplomatic solutions. Although these diplomatic dynamics seem feeble, China, Turkey, and the West welcome them seeking future peace negotiations.

The suspension of the deal will lead to increased sanctions pressure on Russia, potentially further affecting its financial and agro-industrial sectors. Additionally, the situation has posed risks of deterioration in Russia-Turkey relations, which could have broader implications in the Black Sea region. The conflict and uncertainty surrounding the deal impacted the global grain market and raised concerns about the sustainability of Russia’s position.

Besides foreign policy, Putin cares about internal Russian politics as well. And shortly after the Prigozhin mutiny, he needed to show “a strong hand.” Since Putin is risk aversive he can only show it when he feels safe, and this is the Black Sea Deal. Pulling out he showed to Russian patriots that he plays a decisive game with the West, hence they need to keep supporting the war. At the same time, Putin undoubtedly remains open for other deals regarding Ukrainian grain, the deals that will not be so public. 

Ukrainian President Vladimir Zelenskiy suggested continuing Ukrainian grain exports without Russia. He pointed out that Russia and Ukraine never signed any documents on the Black Sea Deal, reminding that Russia had an agreement with the UN (mediated by Turkey). Quite interestingly that both Turkey and China have already expressed their hopes for the prolongation of the Deal. 

Legal Dimension:

The legal dimension of the Black Sea Grain Deal is complex and involves agreements and commitments made by the parties. There has never been any direct agreement between Russia and Ukraine on the matter. Instead, Russia signed an agreement with Turkey and the UN, and Ukraine signed a “mirror” agreement with the same sides.

On July 4, 2023, the Russian Foreign Ministry published a press-release “On The Istanbul Agreements”, spelling out reasons why Russia did not profit from the Black Sea Deal, and why it should be stopped. At the same time the very last paragraph of the press-release confirms that Russia signed a Memorandum of Understanding with the UN providing for unblocking of the Black Sea. 

Russia’s withdrawal from the deal raises legal and diplomatic concerns, particularly in light of the Russia-UN Memorandum, which remains in force despite the Deal’s suspension. The Memorandum’s clause on unblocking of the Black Sea implies that ships are allowed to continue leaving Ukrainian ports. However, Ukraine’s actions, such as attacking Black Sea Fleet ships and damaging the Kerch Strait bridge, make it harder for Russia to sell a new economic deal to its internal audience.

The structure and dynamics of the Black Dead Deal reflect Putin’s idea of Byzantine politics. On one hand, there is a UN Memorandum, which has no binding international legal force. On another hand, there are economic interests of major players that Putin needs to coerce. On the third aspect, there is an internal patriotic audience to whom he needs to show political firmness. So, officially pulling out of the deal seems to serve all his aims: it comforts internal patriots; it allows him to render air strikes on Odessa; and it makes Putin feel needed by other important international players.

Putin desperately needs a dialogue with the West. He has raised stakes to get more attention and concessions. Now that the move seems like another failure Putin may want to continue pressure on the Black Sea with voluntary ship inspections. And Turkey and China will have to interfere to stop Russia from crossing the lines as they have already done more than once. 

This move also weakens Russian military influence in the Black Sea. The Russian Army has shown its inefficiency, unable to defend the Kerch Bridge, the symbol of the Crimean Spring. Also, it is unlikely that the Russian Black Sea Fleet will be able to block the Black Sea. As soon as Russia decides to do so, it will give Turkey a perfect pretext to oppose it, as the latter will suffer both political and economic losses. Turkey’s regional influence has increased after Russian failed blitzkrieg. With Erdogan surviving elections and the Turkish economy going further down, could this Putin’s Black Sea escalation spike another violent conflict in the Turkey-controlled domains, maybe even posing a military threat to Crimea?

Vitaly Charushin
Vitaly Charushin
Vitaly Charushin is a Russian pro-democracy activist and member of Advisory Board of Creative Cluster, a French-tech ecosystem partner. He has previously worked at the National Democratic Institute in Moscow.