Stock - Wheat
Russia wants to get the funds from its share of grain exports. That's at the root of the latest crisis. Image Credit: Supplied

With the non-renewal of the grain shipping agreement between Russia and Ukraine, brokered by Turkey, the world has again entered a food crisis that may lead to famine in more than one region, especially in poorer countries that depend on wheat supplies from the Black Sea ports.

As Russia and Ukraine are among the world’s major wheat producers and exporters, the latest crisis recalls historical incidents where conflicts between great powers impacted countries that were not even remotely involved.

The non-renewal of the grain deal has obviously led to a sharp rise in wheat prices - by 10 per cent - and sets the stage for further increases. The breakdown in these supplies will not pose a major problem to wealthy countries that can bear the cost of high prices and have access to alternate supplies through various means. But poor countries will have to bear the brunt which adds to the already severe economic and cost of living afflictions.

A food crisis indeed has complex economic and financial implications, and its resolution depends on the major powers involved in the conflict. The earlier agreement allows the safe passage of Ukrainian and Russian grain exports through Black Sea routes, crossing the Bosphorus Strait in four directions to various continents.

Russia not getting its funds

The latest flashpoint stems from the issue of paying for these exports and the financial transfers, as Ukraine gets paid through the international payment system without obstacles. However, those for similar Russian exports do not reach Moscow due to the various sanctions and Russia’s removal from the SWIFT system.

Consequently, Russia perceives that it has not derived any benefits from its grain exports, viewing them as worthless or free due to not receiving payment.

Russia is demanding the exemption of some of its banks from financial sanctions to be able to receive the proceeds, especially since a significant portion of the exports is directed to poor countries whose trade cannot be exchanged in national currencies, Russia wants to handle its grain shipments similar to its oil and gas exports, which are predominantly directed to the likes of China and India, and dealt in their national currencies. Other important currencies, such as the UAE dirham, are used in trade relations between Russia and India.

Do not overlook humanitarian crisis

In addition, there are accusations - and counter-accusations - surrounding the use of some grain ships for military purposes, such as transporting weapons to the warring parties. This situation has turned the entire Black Sea region into a military zone, posing significant risks to commercial ships, which further complicates the crisis and increases risks in the largest waterway for grain trade.

The humanitarian concerns arising from this situation are related to the plight of the world’s poor who rely on Russian and Ukrainian grain supplies. These exports not only serve countries within the EU but also those across the Middle East, Asia, Africa, and Latin America.

For instance, Egypt heavily depends on these imports, prompting it to seek alternative sources at a considerable cost. This, in turn, necessitates searching for additional funding due to the high costs of these imports, while the scene appears to be even more dire for other African countries.

A world at risk of famine

Since this crisis holds significant humanitarian and moral dimensions, it is imperative for the conflicting parties to seek a bare minimum understanding that would allow the continued flow of wheat from Ukraine and Russia.

This is essential to spare many countries from famines, which could result in many deaths and malnutrition involving children and the sick.

Finding solutions to this crisis is not easy, given the complex nature of the conflict and its multilateralism. However, it is not impossible to find a way to ensure that Russia can access the proceeds from its grain exports.

This can be done by either exempting the value of these exports from financial sanctions by designating a Russian bank or by paying it through a third country. The financial payment methods have evolved and multiplied significantly in the past two decades.

Finding alternative ways to facilitate payments for grain exports is not a difficult task - and it will spare the world from many human tragedies caused by any famine set off by this.