Friday’s Insider: Smoke Without Fire

“The United States and Russia have agreed to ensure safe navigation, eliminate the use of force, and prevent the use of commercial vessels for military purposes in the Black Sea.

The United States will help restore Russia’s access to the world market for agricultural and fertilizer exports, lower maritime insurance costs, and enhance access to ports and payment systems for such transactions.”

Ok, let’s refresh our memory. What happened after the beginning of the Russian invasion in 2022?

The Russians blocked all navigation in the Black Sea close to Ukraine, and the so-called “Grain Deal” was agreed upon with the participation of Russia, Ukraine, Turkey, and the UN. It lasted 120 days. It was extended several times after that, but on 17th July 2023, the Russians exited the deal, and it was never renewed.

Why did that happen?

Because after a series of successful attacks on Russian flagship vessels, they had to leave their anchorage in Crimea and move to Novorossiysk. Russia lost any advantage it had in the Black Sea from the first days of the invasion. Since early 2023, hundreds of thousands of tonnes of agricultural products have been loaded from Ukrainian ports.

Now, back to agricultural and fertilizer exports. Russian exports in both sectors have hit record highs since 2022. The EU even initiated a review of potential tariffs on them. From day one, agri-commodities and fertilizers have been exempted from any sanctions, as they are part of the world’s food chain.

Tell me, please-will the statement above push EU fertilizer producers to withdraw their demands for additional tariffs on Russian fertilizers? Or will banks now happily proceed with payments for some production from the “GazpromXYZ” factory?

One of the beneficiaries of this potential loosening of sanctions is supposed to be Russian Rosselkhozbank, which processes most of the payments for Russian grain exports and was disconnected from the SWIFT payment system. However, the SWIFT international banking system is registered in Belgium. On 26 March, European Commission spokesperson Anita Hipper stated that one of the main conditions for lifting or modifying sanctions would be the “unconditional withdrawal” of all Russian troops from Ukrainian territory.

Sometimes, to understand whether there’s something behind the colorful door, we need to think before barging in.

To me, the statement above is just more smoke—without any fire.

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About the Author of “Friday’s Insider”: Ilya Motorygin is the co-founder of GG-Trading and brings 30 years of experience to the fertilizer industry. Renowned for his comprehensive problem-solving skills, Ilya expertly manages deals from inception to completion, overseeing aspects such as financing, supply chains, and logistics.