Black Sea deal unlikely to boost Russian food exports in short-term

By Gleb Bryanski

MOSCOW (Reuters) - A potential deal to ease restrictions on Russia's access to international agricultural markets, touted by Washington and Moscow as a boon for global food security, is unlikely to have much immediate impact, analysts and industry sources said on Wednesday.

But the U.S.-brokered agreement, if it happens, could advance President Vladimir Putin's longer-term ambitions of positioning Russia as an agricultural superpower and secure a much-needed boost in foreign exchange revenues.

The United States reached separate deals this week with Ukraine and Russia to pause their maritime attacks in the Black Sea and halt strikes against energy targets, with Washington agreeing to help lift some Western sanctions against Moscow.

In a post on X on Tuesday, Kirill Dmitriev, head of Russia's sovereign wealth fund and Putin's special envoy on international economic cooperation praised the deal as securing "essential grain supplies for over 100 million additional people."

And a U.N. spokesperson on Wednesday said it would make a "crucial contribution to global food security."

But Andrey Sizov from the Sovecon consultancy said Russian grain and fertilizer exports had already reached record levels during the conflict with Ukraine, with no major war-related security incidents affecting grain-exporting infrastructure.

"Both Ukrainian and Russian exports from the Black Sea are currently proceeding without significant issues, without an 'official truce' and without any 'grain deals'," he said.

"The baseline scenario is that exports will continue as they have been."

Russian agricultural traders and their partners in markets that Russia considers friendly have generally found ways to circumvent Western sanctions, which are viewed more as a nuisance than a major obstacle.

SHORT-TERM PROTECTION, LONG-TERM AMBITION

Rather than being restricted by sanctions, Russian exports have instead been limited by government-implemented caps aimed at reining in inflation, which is running at over 10%.

Russia is the world's top wheat exporter. But it has lowered export quotas and increased export duties to prevent spikes in domestic prices for bread and other agricultural products.

That has led exports to drop to an anticipated 40 million metric tons in the 2024/25 season, down from 55 million tons in the previous season.

"In the end, we protected the interests of Russian consumers. This was the case with grain crops and sunflower oil," Prime Minister Mikhail Mishustin told parliament on Wednesday.

That does not mean the Black Sea deal won't help Moscow further down the line as it aims to boost agricultural exports by 50% by 2030 and target new markets in Asia, Africa and Latin America.

Agricultural exports are the government's second-biggest source of revenues after oil and gas, which have been hit harder by sanctions and Europe's efforts to wean itself off imports from Russia.

Russia's requests that sanctions against its exporting firms, banks and shipping companies be lifted could make doing business easier.

It wants its main agricultural bank, Rosselkhozbank, to have its access to the international SWIFT messaging system restored.

One industry source told Reuters that Russian grain exporters have been facing payment issues since major banks, even in traditional markets in the Middle East, have shied away from handling Russian transactions.

"The U.S. could assist in facilitating these payments as well as addressing insurance issues with vessels carrying Russian grain," the source said.

(Reporting by Gleb Bryanski; Editing by Joe Bavier)