Grain Deal Suspended, Moldovan Agriculture in Crisis

Anton ŠVEC

Russia’s withdrawal from the grain deal will not significantly affect the well-being of Moldova’s agricultural sector, which is in a severe crisis due to Ukrainian dumping and lack of government support

Yesterday, Kremlin spokesman Dmitry Peskov informed the public about the halt of Russia’s participation in the Black Sea grain initiative. President Vladimir Putin voiced his opinion about this on 13 July, anticipating the cancellation of the grain deal. The explosions on the Crimean bridge became a symbol of the agreements’ termination mediated by Turkey and the UN last July. At the same time, Peskov promised that Russia will immediately rejoin the deal after its demands are met. However, the broad list of these demands (lifting the ban on exports of Russian grain and mineral fertilizers stuck in EU ports; reconnecting Russian Agricultural Bank to the SWIFT system; resuming the transit of Russian ammonia through Ukraine and imports of agricultural machinery and spare parts to Russia) leaves minimal chances of their fulfilment. The EU has already refused to connect the bank to the SWIFT system and lift sanctions, and the ammonia pipeline was blown up in the Kharkiv region. Moreover, Russia itself has reinsured and is ready to export its agricultural products through partners in the Arab countries of the Persian Gulf. So, de facto, the Russians stopped coordinating applications for the ships’ passage at the end of June. Officially, the Russian Foreign Ministry has notified Ukraine, Turkey and the UN that the deal has been terminated as of today. Recep Erdogan, who did not hide his optimism last week, was also forced to admit that the “grain deal is history” (the last two extensions were connected to the presidential election in Turkey). A statement from the Russian Foreign Ministry said that in practical terms, this means withdrawal of guarantees for the safety of shipping, curtailing the humanitarian sea corridor and restoring the regime of a temporarily dangerous area in the north-western waters of the Black Sea. In fact, Ukraine, which exported about 33 million tons of grain and oilseeds during the year and has long since lost access to the ports in Mariupol and Berdiansk (the port in Mykolaiv cannot be used either), won’t be able to export grain from the ports of Odessa, Yuzhny and Chernomorsk. It is not excluded that there will be attempts to ensure the movement of grain carriers under the cover of military ships, but Russia has already brought additional forces in the north-western part of the Black Sea, so the operation of the corridors is almost excluded. This means that the strain on the infrastructure of ports in Moldova’s Giurgiulesti and Romania’s Constanta will increase. Klaus Iohannis has already said that logistical routes through Romania for the export of Ukrainian grain will continue to operate. However, with the permission of the European Union, Bucharest has the right to limit agricultural transit from Ukraine through its own facilities - the EU banned the export of Ukrainian grain to 5 countries (Romania, Poland, Hungary, Slovakia and Bulgaria) back in early May. As for our Danube port, it already operates at the limit, handling mostly Ukrainian products. Curtailing the Black Sea grain initiative will put serious pressure on the market. Even yesterday, wheat prices jumped by 2-4% and will continue to rise. If we look away from the critical situation with logistics, the rapid growth of grain prices may turn out to be a positive factor for the Moldovan agricultural sector, as it will allow local farmers to compete on foreign markets and not to sell their products at a loss. On the other hand, Ukraine, limited in exports to the EU countries, will have to look for closer markets. If earlier Moldova was only a transshipment point for Ukrainian exports, due to which the state enterprise Railway of Moldova made a good profit, now Ukrainian products may flood our market. The domestic agricultural sector is obviously unable to compete in terms of prices, especially since the government is in no hurry to listen to the demands of the striking farmers (who only temporarily stopped the protest while harvesting). In turn, the government will not dare to take protection measures, as this contradicts the official position of maximum support for Ukraine. It is unlikely that our government will check whether Kyiv was serious when it warned of retaliatory measures during the last aggravation. Obviously, the current government will rely on the support of the EU, but Brussels will need to first decide where to get grain and how to ensure food security of the community’s key countries. According to experts’ forecasts, the EU countries will suffer the most from the termination of the deal - they received about 53% of supplies from Ukraine. So far, there is no EU investment, and the government is unable to meet the farmers’ demands (Dorin Recean promised support of 200 million lei, while the agrarians asked for 800 million lei). The situation in the agricultural sector worsens due to the lack of access to Russian mineral fertilizers, including for political reasons. Latvia could theoretically release some 225,000 tons of Russian fertilizers on the condition that they are supplied to specific countries, including Moldova, but such a deal is hardly plausible. This summer’s abnormal heat makes the issue of irrigation as acute as possible, because the area of irrigated land is still dozens of times smaller than in Soviet Moldavia, and all the equipment has been privatized or sold off. Given the changing temperature and regular droughts, urgent measures are needed at the state level, but so far nothing has been done. Thus, the agricultural sector of our country, due to the failure of the grain deal, will face another “perfect storm”, the consequences of which may radically affect the stability of the government, which has already experienced several waves of resignations, and the electoral potential of the ruling party in the run-up to the local elections. Opposition forces inside and outside Moldova keep its eyes on the resumption of farmers’ protests. Once again, we enter a period of turbulence in the conditions of total betting on the success of the Ukrainian counteroffensive and the destruction of all channels for rational communication with Moscow and with the opposition. To what extent this regime of state functioning will prove viable, we will find out very soon.