Russia and Ukraine agree to allow food shipments out of the Black Sea

Russia and Ukraine agreed to a deal Friday to open Ukrainian ports on the Black Sea, releasing stalled grain shipments into world markets to help alleviate an ongoing food crisis and bring down global prices.

The deal between the two countries was mediated through Turkey, which helped to broker the agreement under the auspices of the United Nations. The ongoing war between Russia and Ukraine has led to a de facto blockade of Black Sea ports that have been unable to export agricultural goods like fertilizer and grain.

United Nations Secretary-General Antonio Guterres, speaking at the signing ceremony in Istanbul, hailed the deal as a “beacon of relief in a world that needs it more than ever.”

“To the representations of the Russian Federation and Ukraine, you have overcome obstacles and put aside differences to pave the way for an initiative that will serve the common interests of all. Promoting the welfare of humanity has been the driving force of these talks,” he said.

The deal will open a passage for significant volumes of commercial food export from the ports of Odessa, Chernomorsk and Yuzhne, Guterres said. Russian Foreign Minister Sergei Lavrov has said that naval mines in Ukrainian ports had been an issue for exports in the past.

“The shipment of grain and food stocks into all markets will help bridge the global food supply gap and reduce pressure for high prices,” Guterres added.

Turkish President Recep Erdogan said at the ceremony the agreement would help to ease pressure on global food prices.

“We are also helping with controlling food inflation, which has become a global problem,” Erdogan said.

Speaking to reporters later Friday, White House national security spokesman John Kirby said that the United States welcomes the development but said officials would be watching it closely, noting that Russia will need to actually comply with the agreement in order for it to be effective.  

Kirby described the Biden administration as both hopeful and “clear-eyed” about the deal.  

“If it’s fully implemented and complied with it will have an impact, but it’s just too soon to know,” Kirby said.

Other international leaders hailed the agreement.

“Putin’s barbaric invasion of Ukraine has meant some of the poorest and most vulnerable people in the world are at risk of having nothing to eat. It is vital that Ukrainian grain reaches international food markets, and we applaud Turkey and the UN Secretary General for their efforts to broker this agreement,” United Kingdom Foreign Secretary Liz Truss said in a statement from the UK foreign ministry.

Global food prices are up more than 23% since last year, according to the United Nations Food and Agriculture Organization (FAO), though they have been ticking down since May. In the US, food prices are up more than 10% annually.

Global prices for grains have fallen more than 4% since a recent high in May but are still more than 27% higher than they were a year ago, according to the FAO. Wheat prices are nearly 50% higher than they were last year.

A logistical coordination center will also be set up as part of the agreement to monitor its implementation, Guterres said.

Sheer hypocrisy of United States

Imposes sanction on sale of Russian energy products but no restrictions on buying fertilizer 

A tanker carrying a liquid fertilizer product from Russia is about to arrive in the United States, sources and vessel tracking data shows.

It is worth noting that President Joe Biden administration has not blacklisted Russian agricultural commodities, including fertilizers, in the aftermath of the Ukraine invasion.

Still, many Western banks and traders have steered clear of Russian supplies for fear of running afoul of rapidly changing rules.

Russia and Ukraine are major exporters of fertilizer, key to keeping corn, soy, rice and wheat yields high. Farmers have scaled back fertilizer use due to high prices, and cut the amount of land they plan to cultivate.

Washington sanctioned Russian crude, refined products, coal and liquefied natural gas (LNG).

The Liberia-flagged tanker Johnny Ranger was scheduled to arrive in New Orleans on Monday carrying about 39,000 tons of urea ammonium nitrate solution, a fertilizer produced by combining urea, nitric acid and ammonia, the sources and Refinitiv Eikon data showed. The vessel loaded last month at St. Petersburg, according to Eikon data.

Details on the seller and buyer were not immediately available. The US Treasury Department and the US Customs and Border Protection agency declined to comment.

A State Department spokesperson said the United States has never sanctioned food or agricultural goods from Russia. "Unlike the Russian government, we have no interest in weaponizing food to create humanitarian crises at the expense of vulnerable populations."

US non-food sanctions will remain in place until Russian President Vladimir Putin stops the war in Ukraine.

In 2021, the United States imported US$262.6 million worth of urea ammonium nitrate fertilizers from Russia, according to the Commerce Department.

This week, the US International Trade Commission revoked hefty anti-dumping and anti-subsidy duties on urea ammonium nitrate fertilizers from Russia in an effort to ease fertilizer shortages and price increases.

Fertilizer cargo from Russia heads to US as many worry about food shortages

In recent days, there are widespread worries that sky-high global fertilizer prices could lead to food shortages.

 

Arab public opinion turning against normalization with Israel

A recent poll by an American think tank has confirmed what every independent expert knows: Arab public opinion does not support the controversial policy of normalization between Israel and Arab states.

Almost two years into the signing of the controversial Abraham Accords between Israel and some Arab states, the already shaky support for normalization among Arab public opinion has dropped further, a poll by The Washington Institute showed. 

“The wave of Arab countries officially normalizing relations with Israel over the past several years stands in contrast with a growing lack of public support for the Abraham Accords in the Persian Gulf,” the Institute said, noting that those who favorably view normalization with Israel are now a “minority” in Saudi Arabia, Bahrain, and the United Arab Emirates (UAE).

It added, “TWI polling from March 2022 demonstrates that more than two thirds of citizens in Bahrain, Saudi Arabia, and UAE view the Abraham Accords unfavorably less than two years out.”

The polling stands in contrast to another one from November 2020, in which some percentage of Emiratis, Bahrainis, and Saudis showed relative optimism about normalization.

While in November 2020, nearly 40 percent of Saudis and Qataris supported the Accords, support for these agreements is now hovering between 19% to 25% in Saudi Arabia, Bahrain, and the UAE, according to the new polling. 

The number of those in Lebanon viewing the Abraham Accords “very negative” has increased from 41% in November 2020 to 66% this March, while support in Egypt has dropped from about a quarter to 13%.

Attitudes toward sub-state business and sports relations with Israel have also been remarkable in the Persian Gulf Arab countries. A further 50% of Saudis and 47% of Emiratis strongly disagreed with allowing such ties. With the exception of Kuwait, disapproval rates of allowing business or sports ties with Israelis now edge closer to half (Bahrain – 58%, KSA – 60%, UAE – 55%), the Institute said. 94% of Kuwaitis and 93% of Lebanese surveyed disagreed with the notion—and a further 77% of Lebanese and 88% of Kuwaitis strongly rejected it.

The figures from the poll bear witness to a widely held belief that ordinary Arabs do not support their leaders in establishing ties with Israel. The Abraham Accords might have succeeded in generating a limited base of support in countries that normalized ties with Israel, but they absolutely failed to bring about a drastic change in Arab public opinion. And even that limited base is now evaporating.

The polling also gives substance to the remarks by Ayatollah Seyed Ali Khamenei, the Leader of the Islamic Revolution, in his meeting with Turkish President Recep Tayyip Erdogan. 

In the meeting, Ayatollah Khamenei described the Palestinian cause as being the number one issue in the world of Islam. “Despite certain governments’ interest in the Zionist regime, nations totally oppose this usurper,” he noted. 

Independent polls confirmed that Arabs do not support normalization with Israel. And even in 2020, most polls evinced that the majority of Arabs view normalization unfavorably. A poll conducted in October 2020 by the Arab Center of Research and Policy Studies showed an unequivocal Arab opposition to normalization. It was conducted in 13 Arab countries with 28,000 respondents. The polling showed that 88% of Arabs refused the idea of recognizing Israel.

Russian pipeline resumes supplying gas to Europe

Russia has resumed pumping gas to Europe through its biggest pipeline after warnings it could curb or halt supplies altogether.

The Nord Stream 1 pipeline restarted following after a 10-day maintenance break but at a reduced level.

It may be recalled that on Wednesday, the European Commission had urged countries to cut gas use by 15% over the next seven months in case Russia switched off Europe's supply.

Russia supplies Europe 40% of its natural gas requirement last year.

Germany was the continent's largest importer in 2020, but has reduced its dependence on Russian gas from 55% to 35%. Eventually, it wants to stop using gas from Russia altogether.

Russia's President Vladimir Putin has sought to play down fears, promising that state gas firm Gazprom would fulfill all its contractual obligations. His spokesman, Dmitry Peskov, denied that Russia was using gas for political blackmail.

The pipeline is only delivering 40% of its capacity, and the head of Germany's network regulator warned that the resumption of gas flows was not a sign that tensions were easing.

"The political uncertainty and the 60% cut from mid-June unfortunately remain," Klaus Müller said.

Gazprom cut the flow of gas through Nord Stream 1 last month, blaming the delayed return - due to sanctions - of a key piece of equipment which had been serviced in Canada.

The turbine is now believed to be on its way back to Russia, but President Putin recently said that if it is not returned, supply would have to be reduced further.

He has also pointed out that another machine is due to be sent for service soon, according to Russia's Tass news agency.

The continued reduction in gas supply through Nord Stream 1 is likely to make it more difficult for countries to replenish their stores before winter, when gas usage is much higher.

European countries have been looking for alternative suppliers of gas, for example LNG from the US, which can be transported by ship.

But building the infrastructure needed to import gas from new suppliers can be expensive and time consuming, which makes it unlikely that Russian gas can be replaced completely before the coming winter.

Instead, it may be necessary to cut gas consumption, and on Wednesday the EU Commission President, Ursula von der Leyen, announced a voluntary target for all EU countries to reduce their gas use by 15%.

In late February, in response to Russia's invasion of Ukraine, Germany abruptly halted plans to open a new pipeline - Nord Stream 2 - which would double the supply of Russian gas to Germany.

Critics of the Nord Stream 2 project had long argued that it would give Russia too much control over Europe's energy supply.

 

Sri Lanka crisis: A warning to Pakistan and Bangladesh

Sri Lanka is in the midst of a deep and unprecedented economic crisis that has sparked huge protests and seen its president quit after fleeing the country - but other countries could be at risk of similar troubles, according to Kristalina Georgieva, Managing Director, International Monetary Fund (IMF).

"Countries with high debt levels and limited policy space will face additional strains. Look no further than Sri Lanka as a warning sign," said Kristalina.

She said developing nations had also been experiencing sustained capital outflows for four months in a row, putting their dreams of catching up with advanced economies at risk.

Sri Lanka is struggling to pay for crucial imports like food, fuel and medicine for its 22 million people as it battles a foreign exchange crisis. Inflation has soared about 50%, with food prices 80% higher than a year ago. The Sri Lankan rupee has slumped in value against the US dollar and other major global currencies this year.

Many blame ex-President Gotabaya Rajapaksa for mishandling the economy with disastrous policies whose impact was only exacerbated by the pandemic.

Over the years, Sri Lanka had built up a huge amount of debt - last month, it became the first country in the Asia Pacific region in 20 years to default on foreign debt.

Officials had been negotiating with the IMF for a US$3 billion bailout package. But those talks are currently stalled amid the political chaos.

The same global headwinds - rising inflation and interest rate hikes, depreciating currencies, high levels of debt and dwindling foreign currency reserves - also affect other economies in the region.

China has been a dominant lender to several of these developing nations and therefore could control their destinies in crucial ways. Buy it's largely unclear what Beijing's lending conditions have been, or how it may restructure the debt.

Where China is at fault, according to Alan Keenan from International Crisis Group, is in encouraging and supporting expensive infrastructure projects that have not produced major economic returns.

"Equally important has been their active political support for the ruling Rajapaksa family and its policies... These political failures are at the heart of Sri Lanka's economic collapse, and until they are remedied through constitutional change and a more democratic political culture, Sri Lanka is unlikely to escape its current nightmare."

Worryingly, other countries appear to be on a similar trajectory.

Pakistan

Fuel prices in Pakistan are up by around 90% since the end of May, after the government ended fuel subsidies. It's trying to rein in spending as it negotiates with the IMF to resume a bailout program.

The economy is struggling with the rising cost of goods. In June, the annual inflation rate hit 21.3%, the highest it has been in 13 years.

Like Sri Lanka, Pakistan also faces low foreign currency reserves, which have almost halved since August last year.

It has imposed a 10% tax on large-scale industry for one year to raise US$1.93 billion as it tries to reduce the gap between government revenue and spending - one of the IMF's key demands.

"If they are able to unlock these funds, other financial lenders like Saudi Arabia and the United Arab Emirates may be willing to extend credit," Andrew Wood, sovereign analyst at S&P Global Ratings said.

Former Prime Minister Imran Khan who vowed to fix some of these problems, was ousted from power although the faltering economy is not the only reason for that.

Again China plays a role here, with Pakistan reportedly owing more than a quarter of its debt to Beijing. "Pakistan appears to have renewed a commercial loan facility vis-a-vis China and this has added to its foreign exchange reserves and there are indications they will reach out to China for the second half of this year," Mr Wood added.

Bangladesh

With reserves dwindling, the government has acted fast to curb non-essential imports, relaxing rules to attract remittances from millions of migrants living overseas and reducing foreign trips for officials.

"For economies running current account deficits - such as Bangladesh, Pakistan and Sri Lanka - governments face serious headwinds in increasing subsidies. Pakistan and Sri Lanka have turned to the IMF and other governments for financial assistance," said Kim Eng Tan, a sovereign analyst at S&P Global Ratings.

"Bangladesh has had to re-prioritize government spending and impose restrictions on consumer activities," he said.

Rising food and energy prices are threatening the pandemic-battered world economy. Now developing nations that have borrowed heavily for years are finding that their weak foundations make them particularly vulnerable to global shock waves.

Are Russia and Iran friends or foes?

A budding courtship between Russia and Iran is an unwelcome development for the West in general and the United States in particular.

Russian President Vladimir Putin used a rare foreign trip on Tuesday to hold talks in Tehran with Supreme Leader Ayatollah Ali Khamenei and President Ebrahim Raisi, as well as Turkish President Tayyip Erdogan.

The fact that Russia and Iran are competing energy producers is likely to place limits on any deeper partnership.

Here's a look at some of the key questions that their developing relationship poses.

CAN IRAN HELP RUSSIA IN THE UKRAINE WAR?

US officials have said Iran is preparing to help supply Russia with several hundred unmanned aerial vehicles (UAVs), or drones, including some that are capable of firing weapons, but neither country has confirmed it. Russian presidential aide Yuri Ushakov was quoted by RIA news agency as saying Putin had not discussed the issue with Iran's leaders.

"Russia deepening an alliance with Iran to kill Ukrainians is something that the whole world should look at and see as a profound threat," US National Security adviser Jake Sullivan said last week.

Ukraine has used Turkish-supplied Bayraktar drones to lethal effect in targeting Russian units and destroying huge quantities of tanks and other armored vehicles. Jack Watling, a war expert at the RUSI think-tank in London, said Iranian drones would be useful to Russia for both reconnaissance and as loitering munitions that can bide their time in locating and engaging suitable targets.

"Beyond supplying UAVs Iran can also help Russia evade sanctions and potentially collaborate on the manufacture of weapons systems that are less dependent upon supply chains through Western countries," he said.

WHAT CAN RUSSIA LEARN FROM IRAN ON SANCTIONS?

Iran has many years of experience of defending itself against Western sanctions over its disputed nuclear program. "The Russians see Iran as being highly experienced at, and a potentially valuable partner, in evading Western sanctions," said Watling.

Russia, meanwhile, has been hit with waves of sanctions against banks, businesses and individuals over the war in Ukraine. Both countries therefore lack access to Western technology and capital, said Janis Kluge of the SWP think-tank in Berlin.

"There might be some lessons that Russia can learn from Iran... In exchange, Russia could offer military goods and possibly raw materials or grain," he said. Russia is already a major supplier of wheat to Tehran.

With some Russian banks cut off from the SWIFT international payments system, Moscow is developing an alternative in which Iranian banks could be included, Kluge said.

More broadly, Iran is part of a wider group of countries - also including China, India, Latin America and Arab and African nations - with which Russia is forging stronger ties in a bid to prove its claim that it can thrive under sanctions and that these will only rebound on the West.

HOW CAN RUSSIA AND IRAN COOPERATE ON ENERGY?

This is potentially a sensitive question, both countries are oil and gas producers, and competition between them has intensified since the start of the Ukraine war as Russia has switched more of its oil exports to China and India at knock-down prices.

"On the economic dimension, the war has significantly worsened their relationship. Moscow is eating Tehran’s lunch in commodity markets and has even fewer resources to throw at projects in Iran," said Henry Rome, deputy head of research at Eurasia Group.

Coinciding with Putin's visit, however, the National Iranian Oil Company and Russia's Gazprom signed a memorandum of understanding worth around US$40 billion under which Gazprom will help NIOC develop two gas fields and six oil fields, as well as taking part in liquefied natural gas (LNG) projects and construction of gas export pipelines.

WILL ANYTHING CHANGE IN THE IRAN NUCLEAR TALKS?

The Ukraine war has changed Moscow’s approach towards talks on reviving the 2015 Iranian nuclear deal, known as the JCPOA.

Eleven months of talks to restore the deal, which lifted sanctions on Iran in return for curbs on its nuclear program, had reached their final stages in March. But they were thrown into disarray over a last-minute Russian demand for written guarantees from Washington that Western sanctions targeting Moscow over its invasion of Ukraine would not affect its trade with Iran.

Although Russia quickly retreated under Iranian pressure, diplomatic momentum for an agreement was lost. The talks have stalled since then over various remaining issues.

Whether the deal can get back on track will be one measure of the impact of the rapprochement between Putin and Iran's leaders.

"Russia’s interference in the JCPOA talks was a significant reversal of the traditional Russian approach and probably further fanned suspicions in Tehran about Moscow’s reliability and trustworthiness," said Rome of Eurasia Group.

Europe inching towards worst energy crisis

The International Energy Agency (IEA) has warned Europe is facing a red alert over its gas consumption and significant additional reductions are needed to prepare the continent for a tough winter ahead.

The warning comes as Russian gas exports to the continent have decreased in capacity and amid maintenance work on the main pipeline to Germany (Nord Stream 1). The IEA fears that further gas cuts cannot be ruled out. 

Experts argue the European Union is struggling to secure alternatives to Russian supplies but has approved another 500 million euros in arms to Ukraine, whereby a push towards a peace settlement may save the bloc a lot of breathing space on its gas stocks, instead of the panic it finds itself in. 

The IEA itself which serves as the west’s energy watchdog says efforts to boost supplies are still falling short and the 27-member bloc needs stricter measures, such as restricting air conditioning demand (during the current heat wave in Europe) and auctioning gas supplies to industry.

Dr. Fatih Birol, the Executive Director of the IEA has said there is a global energy crisis but warned the situation is especially perilous in Europe, which is at the epicenter of the energy market turmoil. He has expressed concern about the months ahead for the continent. 

The IEA has acknowledged there has not been enough progress by the EU to ween itself of Russian gas especially on the demand side, to prevent Europe from finding itself in an incredibly precarious situation.

It says any further cuts of Russian natural gas flows to Europe, combined with other recent supply disruptions, are a red alert for the European Union, adding that as we get closer to next winter, we are getting a clearer sense of what Russia may do next. The next few months will be critical, the organization warned. 

Moscow has strongly rejected any allegations that it has been using its gas supplies for political purposes. Experts have also argued that it is not in the Kremlin’s interest to cut gas supplies as Russia would lose out financially. 

Nevertheless, Brussels the headquarters of the EU is reportedly preparing to tell the bloc members to cut gas consumption immediately, warning that without increased preservation the continent risks running short of the vital commodity this winter. 

Reports have surfaced that the European Commission will provide members with voluntary gas reduction targets by next week, which cautions that targets will be made mandatory in the event of severe disruption to supplies.

Acting jointly now will be less disruptive and costly, facilitating solidarity and avoiding the need for unplanned and uncoordinated actions later in a possible crisis situation with gas reserves running low.

The IEA warns that efforts to diversify away from Russian gas are no longer enough on their own and that Europe faces the real prospect of rationing its energy unless demand is restricted in order for storage facilities to be filled ahead of the long winter season. 

Birol says he has spoken to EU officials urging them to do all they can right now to prepare for a long, hard winter. He said, “Europe is now forced to operate in a constant state of uncertainty over Russian gas supplies, warning that we can’t rule out a complete cut-off.

The irony is that the EU initiated gas crisis by imposing unprecedented economic sanctions on Russia including hundreds of individuals, businesses, companies, entities, flights, and oil by the end of 2022. In March the bloc said it would reduce gas imports by two-thirds within a year, but there have been disagreements among EU members about this. 

The EU is evidently heavily reliant on Russian gas, yet it has threatened Moscow and at the same time, appears to have shot itself in the foot with its sanctions policy.

An EU last week recommended limiting central heating and cooling in buildings as well as the exemption of coal power stations from its target of emissions reductions.

One EU official has said talks are ongoing over what punitive measures can be enforced if mandatory targets set by the EU to cut gas are not met among member states. 

Europe had relied on Russia for about 40% of its gas but since Russia’s military intervention in Ukraine, Western sanctions have disrupted supplies. The continent imported a total of 155 billion cubic meters of gas from Russia in 2021 and consumes close to 400 billion cubic meters of gas in total during a normal year.

A new EU gas plan issues a warning that continued cuts to Russian gas supplies could lead to a drop in the bloc’s GDP by up to 1.5%, depending on the level of disruption.

Birol said, “Flows have been halted through Nord Stream [1], the biggest single gas pipeline between Russia and Europe, for what Russia says is planned maintenance that is due to end on July 21, 2022. Russia had already significantly reduced the flows coming through Nord Stream in June, and it remains unclear whether they will resume and if so, at what level, after the stipulated deadline.”

The maintenance work is routine procedure that is carried out every year and it’s not uncommon that the work would take longer than ten days. Kremlin spokesperson, Dmitry Peskov, has rejected accusations that Russia would use its gas exports to put pressure on European governments.

Nevertheless, the IEA has offered thorough guidelines and steps to the EU on how to fill European gas storage to adequate levels before winter; starting with the reduction of Europe’s current gas consumption, and putting the saved gas into storage. 

Among the advice is to bring down household electricity demand by setting cooling standards and controls. Government and public buildings should take the lead on this to set an example while campaigns should encourage behavioral changes among consumers.

If the measures proposed by the IEA are not implemented now, Europe will be in an extremely vulnerable position and could well face much more drastic cuts and curtailments later on,” the agency warned. 

It goes on to say that in addition to the measures proposed, “European governments also need to prepare the people of Europe for what may be coming. Public awareness campaigns in the context of an energy crisis have been successful previously in reducing short-term energy demand by several percent.”

According to the IEA, since Russia’s military operation in Ukraine, the amount of revenue that Moscow has collected from exporting oil and gas to Europe has doubled compared with the average of recent years – to US$95 billion. 

“The increase in Russia’s oil and gas export revenues in just the last five months is almost three times what it typically makes from exporting gas to Europe over an entire winter.” the IEA says. 

The agency warns that should Russia decide to completely cut off gas supplies before Europe can get its storage levels up to 90%, the situation will be even more grave and challenging.

The warnings and plans for Europe to cope with enough heat in the winter offers an idea on how reliant the EU is on Russian gas and how fragile the situation may become in wintertime. 

Cool heads are required at such a delicate time. Perhaps a peace deal, which the US-led NATO alliance doesn’t appear to care about, is just what’s needed.