Analysts and industry sources say that a potential agreement to ease restrictions on Russia’s access to international agriculture markets, hailed by Washington and Moscow, will not have a significant impact on the global food supply.

The U.S.-brokered deal, if it comes to pass, would help President Vladimir Putin achieve his long-term goals of establishing Russia as a superpower in agriculture and boosting foreign exchange earnings.

This week, the United States and Russia reached separate agreements to stop their attacks on energy targets and to stop maritime attacks in Black Sea. Washington also agreed to lift some Western sanctions.

In a Tuesday post on X, Kirill Dimitriev, the head of Russia's sovereign fund and Putin’s special envoy for international economic co-operation, praised this deal, saying that it secured "essential grains supplies for more than 100 million people."

A spokesperson for the U.N. said on Wednesday that it would "make a crucial contribution to global food safety."

Andrey Sizov, a consultant with Sovecon, said that Russian grain and fertiliser exports have already reached record highs during the conflict in Ukraine. There were no major security incidents related to the war that affected the grain-exporting facilities.

He said that both Ukrainian and Russian exports to the Black Sea were proceeding smoothly, without any significant issues. "There is no official truce" and no "grain deals".

The baseline scenario is that the exports will continue to be as they are.

Russian agricultural traders, and their partners on markets that Russia considers to be friendly, have found ways of circumventing Western sanctions. These are seen as more of a nuisance rather than a major barrier.

SHORT TERM PROTECTION AND 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 top exporter of wheat in the world. It has increased export duties and lowered export quotas to avoid a spike in the price of bread and other agricultural goods.

Exports are expected to fall to 40 million metric tonnes in 2024/25, from 55 millions tons the previous season.

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

The Black Sea Deal will still help Moscow in the future, as it is aimed at boosting agricultural exports to 50% by 2030. It also targets new markets in Asia and Africa.

Exports of agricultural products are the second largest source of revenue for the government after oil and natural gas. Oil and gas have been particularly hard hit by sanctions, and Europe has tried to reduce its imports.

The lifting of sanctions against Russia's exporting companies, banks and shippers could ease business.

Rosselkhozbank wants to regain access to SWIFT, the international messaging system, for its main agricultural banking institution.

According to a source in the industry, Russian grain exporters are facing payment problems because major banks in Middle Eastern markets, including those that have traditionally handled Russian transactions, have shied from doing so.

The source stated that the U.S. "could assist in facilitating payments and addressing issues related to insurance with vessels carrying Russian grains." (Reporting and editing by Joe Bavier; Gleb Bryanski)

(source: Reuters)