Kremlin says outlook for Black Sea grain deal is ‘not so great’

By Guy Faulconbridge

MOSCOW (Reuters) -The Kremlin on Wednesday said the outlook for the landmark U.N.-brokered Black Sea grain deal was not great as promises to remove obstacles to Russian exports of agricultural and fertiliser exports had not been fulfilled.

The grain deal is an attempt to ease a food crisis that predated the Russian invasion of Ukraine, but has been made worse by the most deadly war in Europe since World War Two.

The agreement, due to expire next month in its current form, was first signed by Russia, Ukraine, Turkey and the United Nations in July last year and twice extended.

On paper, it allows for the export of food and fertiliser, including ammonia, from three Ukrainian Black Sea ports. But Moscow says that Russian food and fertiliser exports are compromised by obstacles – such as insurance and payment hindrances – that it says must be removed.

Kremlin spokesman Dmitry Peskov said the current agreement was not working for Russia, despite some efforts by the United Nations to get the parts of the deal relating to Moscows interests implemented.

“No deal can stand on one leg: it must stand on two legs,” Peskov told reporters. “In this regard, of course, judging by the state of play today, the outlook (for its extension) is not so great.”

Russia and Ukraine are two of the most important producers of agricultural commodities in the world, and major players in the wheat, barley, maize, rapeseed, rapeseed oil, sunflower seed and sunflower oil markets. Russia is also dominant on the fertiliser market.

More than 27 million tonnes of grain and other foodstuffs have been exported from Ukraine aboard 881 outbound vessels since the Black Sea Grain Initiative began in August, official data shows.

Last month, Russia said it would extend the deal for another 60 days even though the United Nations, Ukraine and Turkey had pushed for a repeat 120-day roll over. Moscow says it is due to expire on May 18.

“Exactly half of this deal has not worked and is not working so far,” Peskov said.

“We know that U.N. representatives are making some efforts, but they are not succeeding and still the second half of the deal does not work,” Peskov said.

Russia has repeatedly said that any further extension of the deal will require a host of its demands to be fulfilled by the West, including the reconnection of Russian Agricultural Bank (Rosselkhozbank) to the SWIFT payment system.

Other demands include a resumption in supplies of agricultural machinery and parts, a lifting on restrictions on insurance and reinsurance, access to ports, the resumption of the Togliatti-Odesa ammonia pipeline and the unblocking of assets and the accounts of Russian companies involved in food and fertiliser exports.

(Reporting by Guy FaulconbridgeEditing by Andrew Osborn)