EU considers Russian bank concession to secure Black Sea grain deal future

Subsidiary would allow sanctioned Russian Agricultural Bank to reconnect to Swift payment network

Ukrainian farmers harvest grain in Odesa region. EPA

The European Union is considering a subsidiary proposal from a Russian bank to try to safeguard the Black Sea grain deal, according to reports, fulfilling a key demand from Moscow to extend the vital agreement.

The subsidiary would allow the sanctioned Russian Agricultural Bank (Rosselkhozbank) to reconnect to the global Swift network, the Financial Times reported on Monday.

Moscow's plan, proposed through UN-brokered talks, would let the bank unit handle payments related to grain exports, the paper said.

It comes as Russia threatens the future of the deal, saying it has little hope for its extension beyond July 17.

The deal — which the UN called "critical" for global food supply chains — allows grain exports to be shipped from certain Black Sea ports and was last extended in May.

Moscow does not have "too much hope" the agreement will survive, Kremlin spokesman Dmitry Peskov said on Monday, echoing comments made by Russia's UN envoy in Geneva earlier in the day.

"Part of the deal has not been honoured," Mr Peskov said. He said Moscow had "nothing to say" on reports of potential EU concessions.

"Russia has repeatedly extended the deal in the hope of positive changes," Russian ambassador to the UN in Geneva Gennady Gatilov told Izvestia.

"However, what we are seeing now does not give us grounds to agree to maintaining the status quo."

Reconnecting the bank to the Swift system was among several Russian demands to extend the deal, which were ultimately not met.

Moscow has threatened to walk away from the deal this month if its demands to improve grain and fertiliser exports remain unfulfilled.

Ukraine has said it is 99.9 per cent certain Russia will quit the deal.

Olha Trofimtseva, Ukraine's foreign ministry ambassador at large, said Russian ammonia producer Uralchem had found an alternative route and did not need to export ammonia via the port of Odesa.

"The grain corridor. 99.9 per cent that Russia will leave it in July," she said late last month.

The war in Ukraine has had far-reaching economic consequences, sending the price of fuel and basic goods skyrocketing across the globe.

The end of the deal would spell disaster for many poorer nations that already suffer from food insecurity, experts previously told The National.

While closure of the corridor would not be "detrimental" in the short-term for Syria, Lebanon or Tunisia, food security experts in Baghdad said it could spell trouble for Iraq.

“If the deal will not be renewed the situation will be terrible because under normal circumstances we are not in control of food security because of water scarcity and climate change," Tahseen Al Mousawi, a water resources and agriculture expert said in April.

Slow inspections and the exclusion of a major Ukrainian port from the deal have already dealt a major hit to global food supplies, the UN has warned.

Food exports through the corridor plummeted to 1.3 million metric tonnes in May from a peak of 4.2 million metric tonnes last October, marking the lowest volume since the initiative's inception last year.

Back in May, Cindy McCain, head of the World Food Programme, told the BBC she was "very worried" Russia may not renew the deal amid increased difficulty in feeding the world as a result of the war in Ukraine.

The Horn of Africa would also be badly impacted by an end to the deal, aid agencies have warned.

"A non renewal of the Black Sea initiative would absolutely hit Eastern Africa very, very hard," Dominique Ferretti, WFP's Senior Emergency Officer, told a Geneva briefing in late June.

"There's a number of countries that depend on Ukraine's wheat and without it we would see significantly higher food prices."

Some 60 million people are still food insecure in seven east African countries, Reuters reported aid agencies saying at the briefing.

More than 10 children face acute malnutrition, an official from the World Health Organisation said, reporting the highest admittance levels to medical facilities in the past three years in Somalia, South Sudan and parts of Kenya.