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Putin has reason to slow down Ukrainian grain deal

Senior European officials see little chance that Russia will be willing to ease global food pressures by striking a deal to allow Ukraine to resume crucial grain exports, saying the Kremlin sees the crisis as leverage against Kyiv and his allies.

Government and intelligence officials say UN-facilitated negotiations with Moscow and Kyiv are still struggling to make progress. They asked not to be identified discussing such sensitive topics. Many issues remain unresolved, said a person familiar with the talks, including how goods can be safely transported into and out of Ukraine.

One of the people said the Kremlin had fabricated the debate as a way to get sanctions lifted and intended to use the threat of world hunger as a negotiating tool in any future peace talks.

The United States has not sanctioned any Russian agricultural products in response to the war and says there is no link between the sanctions imposed on Moscow and grain or fertilizer exports from Russia or Ukraine.

Russian President Vladimir Putin’s invasion caused untold human and economic destruction in Ukraine and forced millions to flee within or to Europe. It has also triggered what many policymakers are warning of as a spiraling food crisis around the world by cutting off shipments of Ukrainian agricultural products, at a time when prices are already rising and shortages are being felt as far away as North Africa and in Asia.

With Ukrainian Black Sea ports strewn with mines and Russia effectively blocking shipping in the region, countries from Turkey to the United States have scrambled to find a solution to get Ukrainian grain flowing again. It is estimated that more than 25 million tonnes of cereals, sunflower oil and other basic products are blocked. The Kyiv government has also accused Moscow of stealing its grain stores and moving them to Russia, and of targeting storage facilities with missile strikes. Russia denies using food as a weapon.

There remains hope that Ukrainian and Russian ministers could meet for talks in the Turkish city of Istanbul this week, according to a person familiar with the talks. The UN-facilitated talks would aim to reach the outline of an agreement this month to move 2 million metric tons of grain per month starting in July, the person said.

Russian Foreign Minister Sergei Lavrov met his Turkish counterpart Mevlut Cavusoglu in Ankara last week. The talks, to which Ukraine said it was not invited, did not lead to any progress.

Either way, Ukraine is unlikely to agree to a request from Moscow to remove mines from ports placed to defend them against possible attacks by Russian forces. Kyiv said it was not convinced by assurances from Moscow that it would not strike, noting that Russia had also insisted before the war that it had no intention of invading.

The crisis has sparked a scramble to get grain out of Ukraine via alternative routes across Europe before the next harvest arrives. President Volodymyr Zelenskiy said the amount of grain awaiting shipment out of Ukraine could reach 75 million tonnes in the fall after this harvest.

Clearance would take months, even if accepted. Instead, the grain could flow out of three Black Sea ports through “safe routes” through Ukrainian territorial waters to the Bosphorus, one of the people said. It is unclear how this would avoid having to remove mines from ports so that ships could dock and pick up grain before sailing on these marked lanes. Cavusoglu said on Wednesday that it was not necessary to clear all the mines to establish the corridor.

There is a separate discussion between the EU and other nations around the use of ports in Poland and Romania and the possibility of rail transport links to more distant ports in the Netherlands, Germany and the the Adriatic, the person said. President Joe Biden said on Tuesday that the United States was working to build temporary silos in Poland and other places along the Ukrainian border and then send grain by train.

Overland routes are likely to be much slower and face their own logistical challenges, including overcrowded rail networks, lagging ports in Eastern Europe and differing rail gauges to Europe. Even if these issues are all resolved, it would not completely replace exports from Black Sea ports, the person said.

One official said the biggest problem of all was lack of trust in Russia. Putin has directly linked the unblocking of Ukrainian grain shipments to the lifting of sanctions against Russia, and his officials continue to perpetuate the claim that food shortages are the result of those sanctions.

A senior European intelligence officer said Moscow was spreading a similar message through influence and disinformation operations in the Middle East and Africa.

The American and European sanctions do not target the Russian agricultural sector or the transport of food and agricultural products. EU restrictions do not prevent Moscow from exporting its fertilizers to third countries. This is even while some shippers, banks and insurers are shunning the trade in Russian fertilizers, with the US government now quietly encouraging companies to buy and ship more of it.

Any deal to ship by sea will need to come with assurances that Russia will not target Ukraine’s storage facilities, as well as its transportation and export infrastructure, one person said.

Both parties must also agree on inspections, with UN-flagged inspectors being considered as a possibility. Russia has said it wants to control these checks, according to the person.

Other operational challenges include the need to acquire large vessels, how to transport grain safely from various parts of Ukraine to ports, and how to insure cargo.

Officials are also pessimistic about the chances of a deal that would see Ukrainian grain funneled through neighboring Belarus, a country that has been used by Russia as a jumping off point to send troops to Ukraine.

A senior intelligence officer said Russia was likely to coordinate with Belarus, which is keen to see its own sanctions lifted. Ukraine has already ruled out using Belarus as an intermediary.

© 2022 Bloomberg L.P.