Economics and Geopolitics of Black Sea Grain Initiative

By Mehmood Ul Hassan Khan | Gwadar Pro Jul 28, 2023

Editor's Note: The author is Executive Director of the Center for South Asia & International Studies (CSAIS) Islamabad and Regional Expert on China, BRI & CPEC. The article reflects the author's opinions and not necessarily the views of Gwadar Pro.

Recently, the Black Sea Grain Initiative (BSGI) has once again become a hot spot of international media attention. At present, international food security cooperation is on the verge of crisis. Complex geopolitical conflicts have once again led to serious food shortages. Many developing countries with financial problems are facing food crises.

In this regard, China made clear its position in a timely manner, calling for maintaining the smooth flow of the global food supply chain, and at the same time resolving geopolitical disputes through rational negotiation rather than conflict. Chinese Foreign Ministry said China hoped that BSGI would continue to be fully implemented. It is worth noting that China has also proposed an international food security cooperation initiative, which reflects China's determination to strengthen communication and coordination with all parties to ensure global food security.

Statistics from the United Nations (2023) also further reflect the strategic importance of BSGI. According to the website of the UN, since the implementation of BSGI for nearly a year, more than 32 million tons of food commodities have been exported from the three Black Sea ports in Ukraine to 45 countries on three continents, solving the supply problem of important food commodities and reversing global food prices. record growth trend.

Likewise, the figures of the UN Food and Agriculture Organization (FAO) Food Price Index also reconfirmed socio-economic value of the BSGI, recording a steady monthly decline over the past year, dropping more than 23 percent from its peak in March 2022.  

Furthermore, data from the World Food Program (WEF) also demonstrates the cross-regional significance of BSGI, enabling it to transport more than 725,000 tons of wheat to help people in need in countries such as Afghanistan, Ethiopia, Kenya, Somalia, Sudan and Yemen. Ukraine supplies more than half of the WEF's wheat in 2022 and 2021 as well. Therefore, BSGI effectively helps Ukraine's grain resources to be transported smoothly in the global supply chain system, stabilizes world grain prices, and maintains peace and stability.The FAO Food Price Index stood at 140.6 in July 2022, when the BSGI was unveiled. It has declined 11.6 per cent since that time, reaching 122.3 points in June 2023.

However, due to slower inspections and the exclusion of the port of Yuzhny/Pivdennyi from the BSGI, food exports through the Black Sea Initiative have decreased significantly in recent months.

In October 2022, the monthly export volume of agricultural products from Ukraine’s three major ports reached a peak of 4.2 million tons, but it was only 1.3 million tons in May 2023; it rebounded slightly to 2.1 million tons in June, but it has only reached 200,000 tons since July.

In summary, the emerging global food supplies disturbance is creating complex socio-economic impediments for many countries and communities living around the globe. Even the IMF believes that delay in resumption and implementation of the BSGI could push the global prices by 10-15 percent.

The IMF has noted in recent days that Russia's withdrawal from the initiative, brokered by Turkey and the United Nations last July, would hit regions that rely heavily on Ukrainian grain exports, including North Africa, the Middle East and South Asia. Unfortunately, in recent conflicts, 60,000 tons of grain purchased by Chinese companies stored at the Odesa terminal was also affected by Russian attacks. On the other hand, the Russian side stated that since July last year, Western countries have issued a series of sanctions on Russia's agricultural product exports, causing Russia to encounter obstacles in payment, insurance, logistics and other aspects. Since the beginning of this year, its agricultural products and fertilizers have been restricted from entering the international market, and have repeatedly suffered from restrictions on bank payments, transportation logistics and insurance industries set by the West.

The Chinese Foreign Ministry stated in mid-July that it hoped that the Initiative would continue to be implemented in a balanced, comprehensive and effective manner. China is willing to strengthen communication and cooperation with all parties to make positive contributions to ensuring world food security. Undoubtedly, BSGI is the lifeline of global food security and a beacon of hope in a troubled world. There is an urgent need for all parties to find the most targeted solutions so that poor countries and regions will no longer face the threat of hunger. Cold War mentality and sanctions should not be linked to humanitarian aid policies like BSGI.

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