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Russia sees 'no ground' to renew grain deal with Ukraine

The cargo ship Mehmet Bey waits to pass through the Bosphorus Strait off the shores of Yenikapi during a misty morning in Istanbul, Turkey, October 31, 2022. (Photo by Reuters)

Russia says it sees "no ground" to extend its Turkey-brokered grain deal with Ukraine, less than two weeks before the expiration of the agreement, which has allowed grain to be shipped out of Black Sea ports despite the war in Ukraine.

In a statement on Tuesday, Russian Foreign Ministry spokeswoman Maria Zakharova once again restated Moscow's demand for its state agricultural bank to be reconnected to the global SWIFT payments system to prevent the deal, also brokered by the United Nations, from collapsing.

A day earlier, the Financial Times reported that the European Union was considering a proposal that would allow Russia's Rosselkhozbank to establish a subsidiary that could connect to SWIFT.

Zakharova, however, dismissed the proposal as "deliberately unworkable", stressing that it would take many months to create such a subsidiary and another three months to connect to SWIFT.

She further dismissed an attempt by the UN attempt to set up an alternative payment channel between Rosselkhozbank and American bank JP Morgan (JPM.N).

"There is no real replacement for SWIFT, and cannot be," Zakharova added, stressing that it was "obvious there are no grounds" to renew the deal beyond July 17, the deal's expiration date.

The Russian foreign ministry spokeswoman also said that Russia was doing everything necessary for all ships covered by the deal to leave the Black Sea before that date.

Russia has, for long warned to exit the deal, complaining that promises to remove obstacles to its own exports of grain and fertilizer have not been fulfilled. It has said sanctions on its payments, logistics and insurance industries have created barriers.

The deal was signed in July last year in a bid to allow Ukraine to resume exports from its southern ports, which had been blockaded by Russia since the start of the war in Ukraine on February 24, 2022.

The agreement last came up for renewal on May 18 and Russia agreed at that point to extend it for 60 more days, to July 17.

Ukraine, which is a major exporter of corn, barley, sunflower oil, and rapeseed oil, used to export most of its crop yields through its main ports on the Black and Azov Seas, but since the start of the Russian offensive, it has been forced to export by train or via its small Danube River ports.

The grain deal came with a separate agreement to facilitate shipments of Russian food and fertilizer that Moscow insists has not yet been applied. The Kremlin had initially threatened to abandon the deal if its concerns were not addressed. 

Moscow demands the reopening of a pipeline carrying ammonia from Russia to the Ukrainian Black Sea port of Pivdennyi for export to global markets. The Kremlin says the West has blocked the export of ammonia in violation of past deals. Ammonia is a core component of fertilizer.

More than 30 million tons of grain and agricultural products have been exported under the initiative to date. Any disruption or halt to the flow of Ukrainian grain could worsen a food crisis in the poorest countries and increase global prices.

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