Erdogan says Putin may return to grain deal

Turkish President Recep Tayyip Erdogan says he plans to hold talks with Vladimir Putin and they could lead to the reopening of the Black Sea grain deal. Russia is pushing for a return to the deal on its own terms and Erdogan believes they are worth considering. Analysts, however, believe that with the latest actions Russia is trying to drive up prices for an important item of its exports.

“I believe that by discussing this issue in detail with President Putin we can achieve the continuation of these humanitarian efforts” to export Ukrainian grain, Al Jazeera reported, citing Turkish broadcaster Haberturk. Erdogan spoke to reporters on board an airplane while returning from a tour to the Persian Gulf countries.

A new grain deal between Russia and Turkey is “permissible and possible”, but “only after the conditions that President Putin spoke about” are met, Russian Deputy Foreign Minister Sergey Vershinin said Friday: “They will be met – we are ready to consider any options”.

“We have a very close <…> traditional interaction with Turkey, and we are also now in contact with them and exchanging on what to do in the current situation”, he added.

Russia is demanding to improve its ability to export and settle for food, including by connecting Rosselkhozbank to the SWIFT system, as well as fertilizers. Erdogan urged Western countries to consider these conditions.

Meanwhile, analysts believe that with its latest actions, Russia has tried to raise grain prices, which have plunged due to its record exports, and to eliminate its rival Ukraine.

According to the Sovecon forecast, Russian wheat exports in July will amount to a record 4.1 million tons, which is almost 50% higher than the average values. In addition to the good harvest, Russia itself is likely to see part of its supplies as grain from the occupied Ukrainian territories.

In 2023-2024, Russian wheat exports will total 47.5 million tons compared to 45.5 million tons in the crop year that ended in June, which was already a record, the USDA expects.

Following Russia’s announcement of its withdrawal from the grain deal, its threat to sink all ships sailing to Ukraine’s Black Sea ports, and massive strikes on grain storage facilities and ports in Odessa and Nikolaev, wheat prices on the Chicago Board of Trade have risen 12% since the beginning of the week, while corn prices have risen more than 9%.

The Kremlin is willing and able to ensure higher prices, Valerio Antonini, CEO of trading house Quanton Commodities, told The Wall Street Journal, “This is Putin’s message to the West, and he’s not playing this time. High tensions will continue for at least two to three weeks”.

“Russia is now probably the largest wheat supplier in the world, and Ukraine is its competitor. So if Ukrainian ports are closed, Russia will have more opportunities”, said Masha Belikova, an analyst at Fastmarkets.

“We are ready to consider various options for further continuation of grain supplies to the world market – both grain and fertilizers”, Vershinin said.

Ending the grain deal would have negative consequences, from rising food prices to shortages in some regions, which could lead to new waves of migration, Erdogan warned. Some of Ukraine’s grain is not sold on the open market but is supplied to the UN World Food Program (WFP), which distributes it to poor countries. Under the grain deal, Ukraine exported 32.8 million tons of wheat, corn and other products over the year. Developing countries received more than half of this volume, including through the WFP, which bought 313 tons of wheat to distribute to drought victims in Ethiopia, Kenya and Somalia.

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