June 4^th, 2022

In an interview released on June 3^rd, 2022 President Vladimir Putin dismissed allegations that Moscow is responsible for global food crisis and soaring prices for gas and fertilizers. Here are some points he undescored. The full text is available at: http://en.kremlin.ru/events/president/news/68571.

The President explained that the situation with the global food market did not become worse yesterday or even with the launch of Russia’s special military operation. The situation took a downturn in February 2020 during the efforts to counter the coronavirus pandemic when the global economy was down.

First,  large amount of money were allocated to support the population and certain businesses and economic sectors during COVID-19 pandemic. E.g., the money supply in the USA alone grew by 5.9 trillion in less than two years, from February 2020 to the end of 2021 – with unprecedented productivity of the money printing machines. The total cash supply grew by 38.6 percent. The U.S. Secretary of the Treasury recently said it had made a mistake.

The second reason was European countries’ short-sighted policies, and above all, the European Commission’s policy in regard to energy. The capabilities of alternative types of energy are overestimated: solar, wind, any other types, hydrogen power – those are good prospects for the future, probably, but today, they cannot be produced in the required amount, with the required quality and at acceptable prices. And at the same time, they began to belittle the importance of conventional types of energy, including, and above all, hydrocarbons.

What was the result of this? Banks stopped issuing loans because they were under pressure. Insurance companies stopped insuring deals. Local authorities stopped allocating plots of land for expanding production and reduced the construction of special transport, including pipelines. All this led to a shortage of investment in the world energy sector and price hikes as a result. The wind was not as strong as expected during the past year, winter dragged on, and prices instantly soared.

On top of all that, the Europeans did not listen to Russia’s persistent requests to preserve long-term contracts for the delivery of natural gas to European countries. They started to wind them down. Many are still valid, but they started winding them down. This had a negative effect on the European energy market: the prices went up. Russia has absolutely nothing to do with this.

But as soon as gas prices started going up, fertiliser prices followed suit because gas is used to produce some of these fertilisers. Everything is interconnected. As soon as fertiliser prices started growing, many businesses, including those in European countries, became unprofitable and started shutting down altogether. The amount of fertiliser in the world market took a dive, and prices soared dramatically, much to the surprise of many European politicians.

So-called Russian European and American partners started taking steps that aggravated the situation in both the food sector and fertiliser production.

By the way, Russia accounts for 25 percent of the world fertiliser market. As for potash fertilisers Russia and Belarus account for 45 percent of the world market. The crop yield depends on the quantity of fertiliser put into the soil. As soon as it became clear that our fertilisers would not be in the world market, prices instantly soared on both fertilisers and food products because if there are no fertilisers, it is impossible to produce the required amount of agricultural products.

The British and later the Americans imposed sanctions on Russian fertilisers. Then, having realised what was happening, the Americans lifted their sanctions, but the Europeans did not. This will make the situation in the world fertiliser market worse, and hence the crop prospects will be much more modest, and prices will keep going up – that is it. This is an absolutely myopic, erroneous, I would say, simply stupid policy that leads to a deadlock.

 Instead of improving the situation Russia is accused by high-ranking officials of preventing the grain that is actually there, in Ukrainian ports, from leaving. But it is wrong attitude.

Vladimir Putin explained that the world produces about 800 million tonnes of grain, wheat per year. Now we are being told that Ukraine is ready to export 20 million tonnes. So, 20 million tonnes out of 800 million tonnes amounts to 2.5 percent. But if to proceed from the fact that wheat accounts for merely 20 percent of all food products in the world, this means that these 20 million tonnes of Ukrainian wheat are just 0.5 percent.

20 million tonnes of Ukrainian wheat are potential exports. Today, the US officiasl also say that Ukraine could export six million tonnes of wheat. According to our Ministry of Agriculture, the figure is not six, but about five million tonnes, but okay, let us assume it is six, plus it could export seven million tonnes of maize. This is not much.

In the current agricultural year of 2021–2022, Russia will export 37 million tonnes of grain and will raise these exports to 50 million tonnes in 2022–2023. But this is apropos, by the way.

As for shipping out Ukrainian grain to foreign countries, Russia is not preventing this.

In the interview Vladimir Putin suggested six ways to export grain from Ukraine without any difficulties.

The first one. It can be shipped out via the Ukraine-controlled ports, primarily in the Black Sea – Odessa and nearby ports. Russia did not mine the approaches to these ports – Ukraine did this, and namely Ukraine should demine these ports and let the vessels loaded with grain to leave them. 70 different foreign ships are stuck in Ukrainian ports at this point. They are simply locked up and their crews are still being held hostage by Ukrainians.

Vladimir Putin insisted, that before that Ukrainians must clear the mines and raise the ships they sunk on purpose in the Black Sea to make it difficult to enter the ports to the south of Ukraine. Russia we will not use the demining process to initiate an attack from the sea.

There is the second opportunity: via the ports in the Sea of Azov – Berdyansk and Mariupol – are under Russian control, and Moscow is ready to ensure a free exit from these ports, including for exported Ukrainian grain. These ports have been almost demined by Russia. It will create the necessary logistics in this area.

The President of Russia said the Moscow will guarantee their peaceful passage to international waters without any problems.

It is possible to use the third option. to move grain from Ukraine via the Danube and through Romania.

Fourth. It is also possible through Hungary.

And fifth, it is also possible to do this via Poland. Yes, there are some technical problems because the tracks are of different gauges and the wheel bogies must be changed. But this only takes a few hours, that is all.

Finally, the easiest way is to transport grain via Belarus. This is the easiest and the cheapest sixth way because from there it can be instantly shipped to the Baltic ports and further on to any place in the world. But those who imposed sanctions would have to lift the sanctions from Belarus. This is not Russian problem though.

For these reasons, Putin underlined, the problem of shipping grain out of Ukraine does not really exist. He underscored that Russia will provide peaceful passage, guarantee safe approaches to these ports, and ensure the safe entry of foreign ships and passage through the Sea of Azov and the Black Sea in any direction.

BREAKING NEWS:

Russian high-precision air-based missiles have hit an AFU artillery training centre near Stetskovka, Sumy Region. The foreign trainers who had arrived in the centre held practical exercises for Ukrainian servicemen related to using and firing control of M777 155-mm howitzers made in the USA used to kill Russians and Ukrainians.

In addition, a missile attack has resulted in destroying a permanent base of foreign mercenaries near Dachnoye, Odessa Region.

Written by Vladimir P. Kozin