There are no winners when food and fuel supplies are weaponised, trade and financial flows disrupted

Last Friday saw a glimmer of hope with Russia signing an agreement brokered by the United Nations and Turkey for resumption of Ukrainian grain exports through Black Sea ports. Wheat futures prices at Chicago closed 5.9 per cent lower that day. But promise turned into disappointment the very next day, when Russia launched a missile attack at Odesa, housing one of the three Ukrainian ports through which the movement of cargo vessels is to happen. Wheat prices have since rebounded to their pre-deal levels. While the UN is still optimistic that the first ships carrying Ukrainian grain will set sail “within a few days”, the risk of Russian attacks could deter insurance companies, vessel owners, buyers and sellers. Russian claims of its missiles hitting exclusively military facilities and not targeting the grain terminal at Odesa port obviously carry little credibility.

But uncertainty surrounds the fate of not only the unblocking of the Black Sea trade routes — which, by enabling Ukraine to ship out some 20 million tonnes of last year’s cereals and oilseeds harvest, can potentially ease a global food crisis. The missile strikes over the weekend have been followed by the Russian energy giant Gazprom announcing a cut in natural gas flows via Nord Stream 1, the major sub-sea pipeline connecting Europe, to just a fifth of its capacity from Wednesday. This “weaponisation” of food and fuel supplies by Russia has dangerous implications, just as the economic sanctions imposed by the West against the Vladimir Putin administration have larger consequences. There are no winners in such “wars by other means” that disrupt normal trade and financial flows.

The only consolation, if at all, would be from the economic blockades and sanctions not working fully. For all its hostile actions, Russia will find it difficult to obstruct a UN-backed deal guaranteeing safe passage for Ukraine’s exports through the Black Sea to Turkey’s Bosporus Strait and on to world markets. The world, particularly China and India, has also figured out ways to import and pay for oil, coal and fertilisers from Russia. Global prices of corn, wheat and palm oil, too, are 30-50 per cent below their highs in March-April. At the end of the day, it is only economic reality — and expectation of better sense prevailing — that holds out hope. The prospect of Europe facing peak winter gas shortages (15 per cent reduction in consumption is not an easy goal to achieve) and Russia not finding alternative markets should, sooner than later, make dialogue and diplomacy the only way forward. The current levels of oil and food prices are simply unsustainable, just as the world cannot afford a choice between inflation and recession.

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