April 24, 2024

Russia Wins Black Sea Grain Market as IEA Warns of Gas Crisis

  • It’s been over a year since Russia invaded Ukraine but 2 commodities – grain and gas – are back to square one.
  • Russia said it would not extend the Black Sea grain package that allows food exports from Ukraine.
  • The IEA warned on Monday that Europe could face an energy crisis this winter if Russian gas supplies are cut.

It almost feels like 2022 again.

Russia has killed the Black Sea grain market, and there are renewed warnings that Europe could face a natural gas crisis this winter if the Kremlin decides to cut supplies.

“The Black Sea agreements are no longer in force,” Kremlin spokesman Dmitry Peskov told reporters on Monday. according to TASS, Russia’s state news agency.

The hate deal which passed away on Monday food and fertilizer were allowed to be transported out of three main Ukrainian ports, despite the Russian blockade. The agreement was reached in July 2022 to allow Ukraine to continue exporting its food products to the world market amid the ongoing global food crisis.

To put that into context, the United Nations convinced Russia last year to compromise on the Black Sea grain deal by jeopardizing a sweetener — the group would help smooth Russia’s food and fertilizer exports amid sweeping sanctions that did not target the those essential goods.

But Moscow said Western sanctions such as those targeting payments and Insurance still making it difficult to export Russian products. As a result, the Black Sea grain market was cut off.

Ukraine and Russia are major exporters of wheat, so grain prices rose to record highs when the war began more than 500 days ago. Prices fell back to pre-war levels when the grain bundle of the Black Sea was struck.

And predictably, Russia decided not to renew the agreement on Monday wheat prices teasing over 3%.

It seems that we are returning to each other with another commodity – natural gas.

Europe managed to avoid an energy crisis last year thanks to a warm winter, but there is no guarantee that it will be so lucky this year. There are renewed fears that Europe’s energy stockpile could be threatened this year if Moscow cuts supplies to the continent.

Monday, the International Energy Agency, or IEA, warned of “major uncertainties” for Europe ahead of winter, reflecting the panicked energy markets faced in the immediate aftermath of Russia’s invasion of Ukraine.

“A cold winter, together with a complete stop in Russia of piped gas supplies to Europe early in the heating season, could easily renew market tensions,” the IEA said in its third quarter gas report. “Fierce competition for gas supplies could also emerge if colder-than-normal weather in Northeast Asia and stronger-than-expected economic growth in China.”

The European Union has drastically cut its dependence on Russian gas – the bloc used to get about a third of its supplies from Russia before the war – but that has fallen to around 10% in a month of November 2022, according to. I put a date.

This is also partly because most gas flows through the key Nord Stream 1 pipeline stopped after a big explosion.

Although the EU is disappearing liquefied natural gas and storing the fuel before summer and winter – the two seasons when usage typically rises for cooling and heating purposes – even “full storage sites are not a guarantee against market volatility during the winter,” the IEA said .

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