EU’s attempt to save Ukraine’s grains crop made headlines during the last days since Ukraine is one of the world’s agricultural giants, which provides around 6% of the total food calories on the international market. According to the first data, the initiative is becoming effective. But does that mean that a global food crisis is totally averted?
What is at stake
According to data from the Food and Agriculture Organization of the United Nations, Ukraine has a 42% share of the global sunflower oil export, 16% of the total maize trade, 10% of barley, and 9% of wheat. Its exports mainly go to MENA countries, such as Lebanon, which imports 81% of its wheat from Ukraine, followed by Qatar (64%), Tunisia (49%), and Libya (48%). Most of this agricultural output stayed in Ukraine because of the Russian blockade of Odesa and other Ukraine Black Sea ports. But this is only part of the global perturbation generated by the war. Russia is also a massive food provider, with amounts similar to or higher than Ukraine in such categories, and is very likely to redirect its exports to other markets. At the beginning of April, Dmitry Medvev, the former president of Russia and one of Putin’s prominent acolytes, threatened his Telegram channel with his country’s redirection of agricultural and food exports to “friendly” countries. Medvedev’s message comes after Vladimir Putin’s visit to Beijing in February 2022, before the Ukraine invasion, when China lifted trade restrictions related to wheat and barley imports from Russia.
The Western world cannot control Russia’s food exports, but they add pressure to the global food market. So action taken to save Ukraine’s production is even more necessary.
Who is affected
Unlike in energy, Europe is self-sustainable in terms of food. A press release published by the European Commission on 23 March states that “food availability is currently not at stake in the EU” and “the EU is a net food exporter.” The data above point to some of the most affected countries in MENA. In addition to food security, the perturbation of Ukraine exports has a geopolitical significance since many MENA countries have relatively volatile political situations, and food is very significant in daily expenses. An oscillation in food prices can trigger political instability.
Therefore, Europe’s concern about the global food trade is not selfish. Still, the EU has taken concrete steps to avert a crisis that could strike back with geopolitical repercussions.
What the EU has done
On 12 May, the European Commission released a Communication including a detailed action plan about rerouting Ukraine’s agricultural exports to the so-called Solidarity Lanes. These corridors are to take into the EU and the final markets of the products stored in Ukraine because Russia is blockading the ports. The action plan identified the main bottlenecks, such as different gauges for railways or delays at borders, and proposed solutions to the member-states.
Among the corridors identified by the Solidarity Lanes, the most convenient starts at Giurgiulești (Moldova/Ukraine/Romania border), goes to the Danube Romanian port of Galați, and then to the Constanța port, the biggest at the Black Sea. The most effective land transportation starts on railways since the typical capacity of a freight train (29 wagons) is around 1,900 tons, compared to trucks, which are limited to 25 tons by EU legislation. River barges have an average capacity of 2,000t (although they can go up to 4,000t), while maritime ships can store more than 30,000t.
An alternate route involves land transport to Galați and loading in maritime ships there since one of the Danube arms, Sulina, is a maritime channel suitable for the higher draft of sea-going freighters.
Other corridors also have started being used since the beginning of Ukraine’s invasion. The action plan aims to take out of Ukraine approximately 20 million tons of grains from last year’s crop. According to European Commission data, Solidarity Lanes resulted in a total amount of 2,5 million tons of cereals taken out of Ukraine between 1 and 27 June, while in May, it was 1,7 million tons. Typically, the volume of grains exported by Ukraine is 5 million per month.
In terms of volume, the Constanța port has unloaded around 800,000 tons of Ukrainian cereals so far. Gdansk, the Polish Baltic port connected to a longer inland corridor, has handled approximatively 60,000 tons.
What needs to be done
EU member states’ efforts can increase infrastructure capacity or simplify border formalities. For example, Romania has taken steps to repair a Russian gauge railway that goes from the Giurgiulești customs to the Galați port, which can directly unload Ukrainian trains. It has removed around half of the wagons stored in the Constanța Port railway network to increase capacity. Other member states involvement is taking place, or will soon take place in the same line. To be able to further increase the transport capacity, private sector involvement is needed. This is where things get hazy since political action doesn’t have immediate effects.
According to info recently obtained by the Swiss newspaper Neue Zürcher Zeitung, Comvex, one of the most important transport operators, has had a 35-40% increase in volume in the grains business since the beginning of the Ukraine crisis. However, Dan Dolghin, Cereal Operations Director, stated the company doesn’t plan to increase capacity to take higher amounts of Ukraine grains, since the trade will resume its normal routes once the war will end and Ukrainian ports will be available. Moreover, the company plans on focusing on Romanian grain transport, as the shortest supply chain always makes more sense in business terms.
Meanwhile, the 2022 crop is being harvested, and the 2021 Ukrainian grain starts being pushed from behind by the new harvest.
Forecast
Whereas no prediction can be made about the date of the end of the Russia-Ukraine war, Solidarity Lanes is likely to increase in capacity. So far, Brussels’s initiative was operationalized by first-line member states, but Western Europe countries could take steps to operationalize other corridors traced by the Commission’s action plan, which go to Baltic, Northern Sea or Atlantic ports, with longer inland routes. In all, EU could absorb Ukraine’s total agricultural output of 5 million tons/month. However, this doesn’t bring back the international food trade to the shape before the conflict. Global food prices have increased by 29% in May 2022, compared to the same month of 2021, while wheat went up by 53%. This will cause economic and political issues in developing countries but will also trigger a re-alignment of the world according to the lines of economic exchange. Which is, as in many other respects, bipolar.
