Russian attacks, withdrawal from grain deal signal ‘extreme’ inflation for PRC, threaten global food security

FORUM Staff

Backing out of the Black Sea Grain Initiative in July 2023 signals Moscow’s willingness not only to weaponize the world’s food supplies but also to risk alienating supposed allies — including the People’s Republic of China (PRC) — as Russia persists in its unprovoked war against Ukraine.

Under the now-defunct agreement, Russia eased a wartime blockade in the Black Sea, creating a humanitarian corridor that allowed Ukraine to export nearly 33 million metric tons of agricultural products such as wheat, barley, corn and sunflower meal over the past year, according to the United Nations. The deal helped reverse a spike in global food prices and allowed the U.N.’s World Food Programme, the world’s largest humanitarian organization, to deliver 725,000 metric tons of wheat to countries most vulnerable to severe hunger such as Afghanistan, Ethiopia, Sudan and Yemen.

The PRC, however, was the largest recipient of Ukrainian exports under the initiative, buying nearly a fourth of the food shipments, reported the U.N. Analysts say Chinese consumers, like those in other Indo-Pacific countries, will likely see higher food prices because of dwindling supplies.

“China is the biggest buyer of Ukrainian grain and so with the breakdown of the Black Sea Grain Initiative, the pressures on Beijing are going to be extreme in terms of food price inflation,” David Riedel, founder of Riedel Research Group, told news broadcaster CNBC.

“They may have been stockpiling a little bit ahead of the breakdown in that agreement but that’s a stockpile of weeks, not months,” he said. “I would be very concerned about food price inflation in China.”

Russian President Vladimir Putin’s grain deal cancellation also strains Moscow’s relations with Turkey, another major buyer, which helped broker the agreement. The move puts pressure on Egypt, which Putin has called an important partner, but which is the world’s largest wheat importer and — even before the end of the grain initiative — was experiencing 60% inflation, The Wall Street Journal newspaper reported.

Russia’s subsequent attacks on Ukraine’s Black Sea ports have destroyed at least 100,000 metric tons of grain, Reuters news agency reported, and Moscow has warned it will consider Black Sea cargo ships bound for Ukraine as potential military targets. Alternative routes for Ukrainian grain are also threatened. Russian attacks on Ukraine’s Danube River ports have damaged grain storage infrastructure.

Putin has claimed Russia will replace Ukrainian grain lost to global markets. However, the country does not have enough reserves to replace the Ukrainian corn that supplied the Chinese people, Caitlin Welsh, a food and water security expert at the United States-based Center for Strategic and International Studies, told The Wall Street Journal. Ukrainian exports account for more than a fourth of China’s corn, the newspaper reported, citing the Ukrainian Grain Association.

Russia also faces a shortage of grain ships, pushing the country toward older and smaller vessels operated by less-established shipping companies, according to Reuters. Coupled with soaring insurance premiums on Russian ships bound for Black Sea ports, Moscow will incur rising costs to export its grain, analysts said.

Meanwhile, some question whether Chinese Communist Party General Secretary Xi Jinping will prioritize support for Putin over his nation’s food security and economic stability. The PRC’s U.N. representative has called for dialogue and a resumption of Ukrainian agriculture exports. However, Xi has not used his influence over Putin to push for a return to the grain deal, a Ukrainian official told the Nikkei Asia news magazine.

“Even though China is very dependent on imports of grain [from Ukraine], it puts more importance on geopolitical and national security considerations,” Willy Wo-Lap Lam, a senior fellow at The Jamestown Foundation think tank in Washington, D.C., told Nikkei Asia.

Since Russia’s exit from the export arrangement, grain prices worldwide have increased more than 8%, U.S. Secretary of State Antony Blinken told the U.N. Security Council in early August. He pledged that the U.S. would work with allies and partners to mitigate an unprecedented global food crisis fueled in part by the grain deal collapse.