13.07.2022 Author: Vladimir Odintsov

Russia and Turkey Fight the West’s Grain Crisis Together

GRA

As the leaders of Russia and Turkey have repeatedly pointed out, the state of Russian-Turkish relations over the last 10 years has been a real strategic breakthrough. During this period, the volume of economic ties has increased more than 30-fold and it affects completely different spheres, including food security.

It was food security that was the main focus of a meeting between Turkish Foreign Minister Mevlüt Çavuşoğlu and his Russian counterpart Sergey Lavrov in Ankara the other day, during which the Turkish minister again offered his country’s involvement to resolve the grain crisis that has erupted amid the Ukrainian conflict and anti-Russian sanctions from the West. In particular, it has been confirmed that millions of tonnes of Russian grain are already waiting to be shipped to world markets via a secure corridor, which is planned to be established in the Black Sea with Turkish mediation.

On the eve of this meeting, in order to avoid problems with Russian grain supply to world markets, Russia’s United Grain Company (UGC) has signed contracts to supply grain to Turkey for 3 billion rubles with payment in rubles. With the West creating artificial obstacles in the grain market through restrictive sanctions against Russian participation, Russian President Vladimir Putin has changed the rules of the game on the global food market, the UGC said. Russian grain and other agricultural products can now only be bought on the National Commodity Exchange and only for rubles. Thus, no foreign exchanges will be able to influence the prices of Russian grain or other foodstuffs. As for Russia’s own interests, on the one hand it wants to protect itself against the theft of money and products, and on the other hand it wants to be able to influence world prices and set fair prices for grain, rather than be controlled by Western speculators. In this connection, the Russian Union of Grain Exporters, which also includes UGC, asked the Russian Central Bank back in late March to study the possibility of making payments in rubles under export contracts by foreign buyers of Russian grain. The initiative was launched because of the West’s difficulties in obtaining payments against the background of the military operation in Ukraine. The Union of Grain Exporters is convinced that the choice of Russian currency is due to “economic expediency” and reduces risks from exchange rate fluctuations. For example, several contracts have already been signed with Turkey, most recently in March this year.

According to Dmitry Sergeyev, Director General of UGC, UGC exported nearly 3m tonnes of grain in 2021. The company’s main market is Egypt, where UGC ranked first among Russian exporters with 1.5m tonnes of wheat in two growing seasons. “The main direction Russia is striving for today is to completely get rid of mediation by international traders and work directly with importing countries,” the UGC head stated.

UGC Group is an agricultural trade and logistics operator and is Russia’s only state-owned infrastructure company in the agricultural products market. UGC is one of Russia’s top five grain exporters. The group is owned by the state (50% plus 1 share) and Demetra Holding (50% minus 1 share), a Russian agricultural corporation that combines grain and logistics assets.  The group’s assets include 9 grain elevators with a total storage capacity of 720,000 tonnes, 3 processing plants with a capacity of 490,000 tonnes per year, and two port terminals with a total transshipment capacity of 7.8 million tonnes per year, including PJSC Novorossiysk Grain Plant (NGP).

During a meeting with the head of the United Grain Company, Dmitry Sergeyev, on July 6, President Vladimir Putin said that this year’s grain harvest in Russia could be the biggest in the country’s history. On July 6, the Central Bank of Russia reported that Russia had established its own exchange index for wheat and that the commodity had already fallen 40% in price since March.

International experts recognize that Russia has been steadily expanding its share of the global wheat market in recent years and is seeking to consolidate its leadership in this area. Over the past 20 years Russia has gone from being a wheat importer to an exporter with a 20% share of world supply. “There has been a staggering increase in both production and export volumes of wheat from Russia. It has worked hard to increase its market share and that share continues to grow,” James Bolesworth admitted, Director of UK CRM AgriCommodities. Russia is one of the top three wheat producers, with more than a hundred countries buying its wheat, including Egypt, the Philippines, Saudi Arabia, Algeria, Turkey, Brazil, Vietnam and Tanzania.

As is well known, Western sanctions against Russia, which has been forced to carry out a special operation in Ukraine to denazify that country because of the openly Nazi activities of Kiev’s puppet regime, have brought the world to the brink of a food catastrophe. In order to impose Russophobic policies on the world and discredit Russia, the West has recently been increasingly accusing it of blocking grain exports from Ukraine and allegedly provoking a food crisis. Russian President Vladimir Putin has constantly informed foreign leaders about the real causes of the crisis during his personal meetings and telephone conversations and during his recent talks with UN Secretary-General António Guterres. In particular, the Russian leader has repeatedly stressed that Russia has not imposed any restrictions on the export of its fertilizers or grain, demonstrating on the contrary its willingness to participate in solving the global food crisis. All recent restrictions are solely due to Western sanctions against some Russian seaports, creating difficulties in insuring cargo. Owners of Russian companies have been sanctioned, making it difficult to conclude contracts and complicating financial transactions. And all this is being done by the “collective West” clearly on purpose, despite repeated warnings from world experts and media about impending famine in Africa and global migration from the south to the north, with blatant disregard for the concerns and demands of the world’s poorest countries. However, after negotiations between Russia, Turkey and the UN, the problem with Ukrainian grain gradually began to be resolved.

Nevertheless, Western provocations in this direction have unfortunately not ceased. They are trying to wreak havoc with the measures taken by Russia and, in particular, together with Turkey to improve food security with regard to grain supplies on world markets, to artificially trigger a crisis in relations between Moscow and Ankara on this front. And a concrete latest example of this could be the incident with the Russian-flagged Kazakhstani dry cargo vessel Zhibek Zholy, which sailed from the port of Berdyansk to Turkish shores at the beginning of July, carrying around 7,000 tonnes of grain. At the same time, attempts have been made on the Ukrainian side and with the informational support of some Western media to accuse Moscow of allegedly illegally exporting “Ukrainian grain”, to force Turkey to impose sanctions on the shipment and the Kazakhstani dry cargo vessel. However, Ankara did not succumb to such provocations, the Turkish side took no action against the dry cargo vessel leased by the Russian side in the port and no confiscation took place.

As a result, another attempt by the West to derail Russia’s efforts to combat its blatantly political and self-serving grain crisis has been thwarted, while Moscow and Ankara continue to cooperate successfully, including in strengthening food security.

Vladimir Odintsov, political observer, exclusively for the online magazine “New Eastern Outlook”.


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