A damaged grain terminal of a port on the Danube River in the Odesa region, southern Ukraine. EPA
A damaged grain terminal of a port on the Danube River in the Odesa region, southern Ukraine. EPA
A damaged grain terminal of a port on the Danube River in the Odesa region, southern Ukraine. EPA
A damaged grain terminal of a port on the Danube River in the Odesa region, southern Ukraine. EPA

Russia to push alternative grain deal to Turkey


Simon Rushton
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Russia will set out an alternative to the Black Sea grain deal, which was struck to keep food supplies moving to some of the world’s most vulnerable people, when Turkey’s Foreign Minister visits Moscow on Thursday.

Under the plan, Moscow would send a million tonnes of grain to Turkey at a discounted price, with financial support from Qatar. The grain would be processed in Turkey and sent to countries most in need, the Russian Foreign Ministry said on Wednesday.

“We consider this project as the optimal working alternative to the Black Sea deal,” it said.

Turkey, a Nato member that has friendly relations with Russia, helped negotiate the UN-backed deal to ship grain from Ukrainian ports across the Black Sea to avert a global food shortage – the only major agreement signed since the outbreak of the war.

Russian Foreign Minister Sergey Lavrov and his Turkish counterpart Hakan Fidan will discuss the proposal by Moscow on Thursday and Friday. The Kremlin said on Wednesday that Turkish President Recep Tayyip Erdogan would also visit Russia soon.

The Russian statement added that Mr Lavrov would restate Moscow's position that following the collapse of the grain deal, it would consider all ships heading to Ukraine as potentially carrying military cargo.

Ukraine and Russia are both major exporters of grain, and the deal initially helped to bring down global food prices and provide relief to poor countries.

Moscow withdrew from the agreement last month, citing the UN's non-compliance with provisions aimed at easing Russia's exports of agricultural products and fertiliser.

Ukrainian ports have since come under attack, with Russia warning it considers any ships in the Black Sea as potential military targets. Kyiv has also attacked Russian targets around the Black Sea.

Turkey played a key role in mediating between Moscow and Kyiv to secure the grain deal.

Although Turkey is a member of Nato, which opposes Russia's invasion and whose members have provided arms and support to Ukraine, Mr Erdogan has used his country's good relations with both sides to take on the mediator role.

Will the pound fall to parity with the dollar?

The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.

Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.

New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.

“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.

The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.

The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.

Bloomberg

Updated: August 30, 2023, 5:00 PM