Russia signals end to Black Sea grain deal in July if demands not met

Russia signaled on Thursday that if demands to improve its grain and fertilizer exports are not met then it will not extend beyond July 17 a deal allowing the safe wartime export of the same products from three Ukrainian Black Sea ports.

It made the same threat and demands in March. Moscow then agreed last week to renew for 60 days the Black Sea export pact - initially brokered by the United Nations and Turkey last July with Russia and Ukraine to try to ease a global good crisis aggravated by Moscow's February 2022 invasion of Ukraine.

Since March Russia appears to have prioritized two specific demands: restarting a pipeline to transport Russian ammonia to the Ukrainian Black Sea port of Pivdennyi for export to global markets; and reconnecting Russia's agricultural bank, known as Rosselkhozbank, to the SWIFT international payment network.

"If Rosselkhozbank is not connected to SWIFT and there is no progress on the implementation of other 'systemic' problems that are blocking our agricultural exports, then the 'Black Sea initiative' will also have to look for alternatives," Russia's Foreign Ministry said in a statement on Thursday.

It suggested land exports through Europe as an alternative, saying that avenue was more costly for Ukraine.

Rosselkhozbank was cut off from SWIFT by the European Union in June over Russia's invasion. An EU spokesperson has said the bloc is not considering the reinstatement of Russian banks.

AMMONIA PIPELINE

To help convince Russia to allow Ukraine to resume Black Sea grain exports, a three-year pact was also struck last July in which the UN agreed to help Moscow carry out its food and fertilizer shipments.

Under the pact - and as an alternative to returning Rosselkhozbank to SWIFT - US bank JPMorgan Chase & Co has processed some Russian grain export payments, sources told Reuters last month, and could process dozens more. But Russia has dismissed this as unsuitable in the longer term.

The United Nations is working with the African Export-Import Bank (Afreximbank) to create a platform to help process transactions for Russian exports of grain and fertilizer to Africa, the top U.N. trade official told Reuters on Wednesday.

The Black Sea grain deal also allows for the safe export of ammonia. But the pipeline used by Russia to pump up to 2.5 million tonnes of ammonia annually for export to Ukraine's Pivdennyi port from Togliati has not been restarted.

A Ukrainian government source told Reuters last Friday that Kyiv would consider allowing Russian ammonia to transit its territory for export if the Black Sea grain deal was expanded to include more Ukrainian ports and a wider range of commodities.

The source said the language of the Black Sea export deal does not cover the transit of Russian ammonia across Ukraine.

"The transit of ammonia, as well as the delivery of new portions of grain, although not spelled out literally, is implied by the logic of the agreement," the Russian Foreign Ministry said.

"Why does Ukrainian food continue to be successfully exported, and Russian ammonia does not move from the port of Yuzhny (Pivdennyi port)?" it asked.

The Russian Foreign Ministry also complained that "no progress" had been made on its other long-held demands - allowing the supply to Russia of agricultural machinery and spare parts, lifting restrictions on insurance and access to ports for Russian ships and cargo, and unblocking accounts and financial activities of Russian fertilizer companies.