Black Sea deal unlikely to boost Russian footing

27/3/2025 5:57

A potential deal to ease

restrictions on Russia's access to international agricultural

markets, touted by Washington and Moscow as a boon for global

food security, is unlikely to have much immediate impact,

analysts and industry sources said on Wednesday.



But the U.S.-brokered agreement, if it happens, could

advance President Vladimir Putin's longer-term ambitions of

positioning Russia as an agricultural superpower and secure a

much-needed boost in foreign exchange revenues.



The United States reached separate deals this week with

Ukraine and Russia to pause their maritime attacks in the Black

Sea and halt strikes against energy targets, with Washington

agreeing to help lift some Western sanctions against Moscow.



In a post on X on Tuesday, Kirill Dmitriev, head of Russia's

sovereign wealth fund and Putin's special envoy on international

economic cooperation praised the deal as securing "essential

grain supplies for over 100 million additional people."



And a U.N. spokesperson on Wednesday said it would make a

"crucial contribution to global food security."



But Andrey Sizov from the Sovecon consultancy said Russian

grain and fertilizer exports had already reached record levels

during the conflict with Ukraine, with no major war-related

security incidents affecting grain-exporting infrastructure.



"Both Ukrainian and Russian exports from the Black Sea are

currently proceeding without significant issues, without an

'official truce' and without any 'grain deals'," he said.



"The baseline scenario is that exports will continue as they

have been."



Russian agricultural traders and their partners in markets

that Russia considers friendly have generally found ways to

circumvent Western sanctions, which are viewed more as a

nuisance than a major obstacle.







SHORT-TERM PROTECTION, LONG-TERM AMBITION



Rather than being restricted by sanctions, Russian exports

have instead been limited by government-implemented caps aimed

at reining in inflation, which is running at over 10%.



Russia is the world's top wheat exporter. But it has lowered

export quotas and increased export duties to prevent spikes in

domestic prices for bread and other agricultural products.



That has led exports to drop to an anticipated 40 million

metric tons in the 2024/25 season, down from 55 million tons in

the previous season.



"In the end, we protected the interests of Russian

consumers. This was the case with grain crops and sunflower

oil," Prime Minister Mikhail Mishustin told parliament on

Wednesday.



That does not mean the Black Sea deal won't help Moscow

further down the line as it aims to boost agricultural exports

by 50% by 2030 and target new markets in Asia, Africa and Latin

America.



Agricultural exports are the government's second-biggest

source of revenues after oil and gas, which have been hit harder

by sanctions and Europe's efforts to wean itself off imports

from Russia.



Russia's requests that sanctions against its exporting

firms, banks and shipping companies be lifted could make doing

business easier.



It wants its main agricultural bank, Rosselkhozbank, to have

its access to the international SWIFT messaging system restored.



One industry source told Reuters that Russian grain

exporters have been facing payment issues since major banks,

even in traditional markets in the Middle East, have shied away

from handling Russian transactions.



"The U.S. could assist in facilitating these payments as

well as addressing insurance issues with vessels carrying

Russian grain," the source said.