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How Putin just spiked worldwide wheat prices

2023-07-20 04:55
Russian President Vladimir Putin appears to have declared open season on Ukraine's consequential grain exports, targeting the port city of Odesa with new ferocity and jeopardizing worldwide food prices.
How Putin just spiked worldwide wheat prices

Russian President Vladimir Putin appears to have declared open season on Ukraine's consequential grain exports, targeting the port city of Odesa with new ferocity and jeopardizing worldwide food prices.

With the strikes on Odesa, Putin says he wants payback for damage to a nearly 12-mile bridge that connects annexed Crimea to the Russian mainland.

But they also coincide with Russia's retreat from a yearlong deal known as the Black Sea Grain Initiative to keep Ukrainian grain flowing to the world.

RELATED: Wheat Prices soar as Russia-Ukraine tensions flare

While Russia's food exports are supposed to be exempt from Western sanctions, Russia has cited obstacles to its own exports as a reason to pull out of the Ukraine grain deal.

The attacks on Odesa, meanwhile, lit up the night sky Monday and Tuesday and targeted the city's port, a key piece of infrastructure where Russia had allowed grain to be exported as part of the deal brokered last July by the United Nations and Turkey.

Russia, by the way, was already smarting over Turkey's decision to allow Sweden to enter NATO, apparently alongside promises by the US to let Turkey buy F-16 fighter jets.

Then Ukraine claimed credit for damage to the bridge Monday, just as the future of the grain deal came into question.

On Tuesday, US Agency for International Development administrator Samantha Power visited Odesa to announce an additional $250 million in support for Ukraine's agriculture sector, which is a key block of the worldwide wheat market.

I asked Alex Marquardt, CNN's senior national security correspondent who is in Odesa, about the attacks this week and whether they can be directly tied to the grain issue and Putin's anger at the damage to the key bridge.

He sent me this email:

Odesa has come under attack before, as all Ukrainian cities regularly do, with drones and missiles. They're often batted out of the sky, causing damage and hurting -- if not killing -- people but frequently miss their target.

What happened the last two nights -- and last night in particular -- was stunning. The onslaught was, according to the mayor, like nothing Odesa has seen since the start of the war. A "fierce battle" starting at 2 a.m., relentless for over an hour.

After the first night, Monday, the Kremlin said it was a response to the bridge attack. But (Ukraine President Volodymyr) Zelensky said Wednesday, after the second night, the strikes are about the grain deal and there was a lot of damage done in the port last night. That this comes right after Russia pulled out of the grain deal is lost on no one.

Marquardt also interviewed Power about the attacks and their effect on Ukraine's contribution to the worldwide market. Watch his report.

A move that will reverberate around the world

"The idea that Putin would play roulette with the hungriest people in the world at the time of the greatest food crisis in our lifetimes is just deeply disturbing," Power told Marquardt.

He asked if she thinks Russia might rejoin the grain deal.

"It is going to require pressure not only from the United States and the United Nations, but from those countries in sub-Saharan Africa who will suffer most from the higher grain and oil prices," Power said.

She anticipates Russia will continue to target pieces of infrastructure as it deals with military setbacks.

"If you are a bully and an aggressor, it is always easier to lob missiles and send drones at civilian infrastructure. So, I think we absolutely should expect the worst from the Russian Federation as it continues to struggle on the battlefield."

Ukraine's grain is key to the worldwide food supply

Wheat and corn prices on global commodities markets jumped Monday after Russia pulled out of the deal, and they spiked again Wednesday after attacks on the ports in Odesa and as hope faded for Russia to rejoin the grain deal.

From a report by Anna Cooban at CNN Business:

Last year, economic shocks that included the impacts of the Ukraine war and the pandemic were the main reasons for "acute food insecurity" in 27 countries, affecting nearly 84 million people, according to a report by the Food Security Information Network, a data-sharing platform funded by the European Union and the United States. The FSIN defines acute food insecurity as lacking enough food to the extent that it puts the person's life or livelihood at risk.

The International Rescue Committee (IRC) said in November that the deal's collapse would "hit those on the brink of starvation the most." The warning came after Moscow suspended its participation in the pact for several days following drone attacks in Sevastopol, a port city in Russian-controlled Crimea.

UN Secretary General Antonio Guterres also said at the time that a breakdown of the deal would turn a "crisis of [food] affordability into a crisis of availability" if farmers around the world couldn't source fertilizers needed ahead of planting season.

Could Turkey or China bring Russia back on board?

Turkey brokered previous versions of the grain deal and it plans to host Putin for talks in August.

Without a new grain deal, the options are to use railroads to ship Ukrainian grain to ports in Romania or in southeastern Europe. The problems in both of those scenarios are time and money, according to Simon Evenett, a professor of international trade and economic development at the University of St. Gallen in Switzerland. He told CNN's Rosemary Church that ports in Romania are currently being expanded.

Church noted that China has come to rely on grain from Ukraine and wondered if Beijing could lean on Russia to reenter the deal.

Evenett said it's true that China has also suffered from droughts that have affected its domestic production.

"If those droughts turn out to be as significant as people highlight, then maybe Beijing will be moved to put leverage onto Russia to relent on this," Evenett said. "But I think there's a series of ifs there. It's not clear yet if Beijing is particularly worried about its own food security needs."