United Nations Security Council Briefing on the Black Sea Grain Initiative
31 October 2022
Ladies and Gentlemen,
We meet today in a context of acute and prolonged crisis.
Aware of the gravity of the situation, the Secretary General created the UN Global Crisis Response Group on Food, Energy and Finance in March of this year to deal with the impacts of the war in Ukraine in the developing countries.
Our initial analyses were alarming and have not been proved wrong.
Being Russia and Ukraine two very important breadbaskets for the world as the war started, commodity prices that were already rising, skyrocketed.
In March, the FAO Food Price Index recorded its highest level in history.
The world was in no position to absorb this shock.
Climate Change and the COVID-19 pandemic had depleted the capacity of most of the developing world to cope with external shocks. This was the perfect storm: cascading crisis that led to cascading inequalities.
As a result, according to our estimates, over 1.6 billion people, in over 90 countries, were in a state of severe vulnerability to rising poverty, hunger and debt.
This was the beginning of a cost-of-living crisis of global proportions.
Immediately, the Secretary-General focused on breaking the vicious cycle of rising prices and inflation, by addressing food insecurity, the most urgent dimension of this crisis.
The Secretary-General’s plan involved, as very well has been said by Martin Griffiths, the parallel implementation of two initiatives: the Black Sea Grain Initiative, and the Memorandum of Understanding on Promoting the unimpeded exports of Russian Food and Fertilizers to the world markets.
Alongside Türkiye, a key player in this effort, as we all know we signed the two agreements in Istanbul on July the 22nd.
The impact of these two agreements, has been made clear in a short period of time, with massive global welfare effects.
Grain exports from Ukraine and the Russian Federation increased substantially. Wheat exports from the Russian Federation tripled between July and September, while wheat exports from Ukraine more than quadrupled over the same period of time, resulting in lower food prices in international markets and improved access to food for humanitarian actors.
Over three quarters of all maize and wheat for human consumption went to the developing world, including 20 per cent of wheat for Least Developed Countries.
The FAO Food Price Index has declined for six months in a row by about 16 per cent.
According to World Bank models, this decline may have prevented over one hundred million people from falling into poverty.
However, we are still below the volumes traded by Ukraine and Russia for the same period in 2021, and uncertainty of the continuation of the Black Sea Grain Initiative is now causing the prices to rise again. As Martin Griffiths just said, just today wheat futures have risen by over 6 per cent.
Furthermore, fertilisers prices are still two and half times their 2019 level, producing a “fertilizer crunch”, where farmers, especially smallholder farmers from the developing world, are priced out of production.
In North America, fertilizers represent only less than 10 per cent of total production costs whereas in West Africa it is over 50 per cent.
The International Fertilizer Association forecasts a decline of between 18 per cent and 23 per cent of fertilizers used in Sub-Saharan Africa this year.
Due to this, we know that today’s crisis of affordability may become tomorrow’s crisis of availability of huge proportions covering other staples, like rice into it.
Therefore, we have been focusing these days on solving the fertilizer prices, getting access to fertilizer from the Russian Federation to key markets is an important part of this. We have dedicated a lot of efforts to find solutions to the constraints we still have.
What we have called the “chilling effect” of the sanctions on the private sector (overcompliance, reputational risks, market avoidance) are still a real obstacle.
Transaction costs on insurance premiums, financial payments, shipping costs, and transport, for Russian food and fertilizer exports, are very high, leading to continued high global food and fertilizer prices.
Specific actions are bearing some results to our efforts: fertilizer currently stored in ports and warehouses in European ports are being donated for humanitarian needs in Africa, Southeast Asia, and Latin America, with the direct engagement of the WFP.
We anticipate that the first shipment of fertilizers will depart for Africa on the first week of November.
In relation to the UN’s efforts to facilitate the unimpeded access to food and fertilizers from the Russian Federation, there has been very intense engagements with the U.S, the EU, the UK, and other countries and private sector actors, who have issued critical clarifications and high-level political statements. We welcome these efforts.
But, even with clear exemptions on the sanctions, there is still a lot of work to be continued. Specifically, the need to further clarify exemptions for food and fertilizers within the different sanction’s regimes, the need to address indirect constraints to food and fertilizer trade, as well as improve the private sector’s willingness to engage.
We urge all parties to make every effort to resume and extend the Black Sea Grain Initiative and implement both agreements to their fullest.
The United Nations is fully committed and will spare no efforts to continue to work with all parties to ensure that we reach this goal. As the Secretary General said in his statement on Saturday,
‘We do not underestimate the challenges, but we know they can be overcome.’