How to counteract Russia's sale of stolen grain in Ukraine

How to counteract Russia's sale of stolen grain in Ukraine

Blockade of Russian ports and sanctions against buyers of stolen goods will be an effective response to Russia's attempts to export looted goods in our country

Russian federal channels boast of record grain reserves and increased exports of agricultural raw materials: the Black Sea ports of Russia, they say, do not have time to ship grain. Before the start of this year's harvest, carryover grain stocks were indeed at an unprecedented level for the aggressor country. However, this was achieved not due to successful management of Russian fields, but due to the theft of crops from Ukrainian fields and elevators. Although the methods of Putin's "grain procurement" on the occupied lands are changing - from direct looting of stocks to buying up everything that Ukrainian farmers have grown under occupation for a song - the essence of the idea remains the same: to maximize the resource from the temporarily occupied areas and make money by selling other people's agricultural products. And, unfortunately, despite international sanctions against Russia, there are buyers for such goods in the world. What can Ukraine and its partners do to counter this?

The evolution of expropriation: from robbery to buying for a penny

The Russians began stealing Ukrainian grain, directing it to the domestic Russian market and trying to sell it abroad, virtually from the first weeks of the temporary occupation of Ukrainian territories. Grain was transported by rail and road to Crimea and Rostov Oblast, and also transported through the ports of Sevastopol and Berdiansk.

One of the first large consignments of Ukrainian grain stolen by the occupiers was grain that had already been loaded onto ships that did not have time to leave the port of Berdiansk due to the outbreak of large-scale Russian aggression. There is a well-known story when, at the end of March last year, the Russians pulled five fully or partially loaded ships out of the port in an unknown direction.

According to the Financial Times, last year in early May, in the temporarily occupied areas of Zaporizhzhia region, the occupiers created the State Grain Operator company, headed by a businessman from St. Petersburg. The occupation administration reported that at that time, up to 5,000 tons of grain were exported from the region daily by rail and another 1,500-2,000 tons by road.

Therefore, back in May last year, the Ministry of Foreign Affairs of Ukraine issued a statement condemning the actions of the Russian Federation in disposing of grain taken from Ukrainian farmers, traders and processors. As noted, the theft of food resources from the territory of an independent sovereign state is one of the manifestations of looting. Our foreign ministry has warned consumers that grain consignments sold by the Russian Federation may partially or fully contain grain stolen in Ukraine. Thus, any country that knowingly buys such agricultural products is an accomplice to the crime.

At that time, the Ukrainian government estimated that the occupiers had stolen at least half a million tons of grain worth more than $100 million. "Russia's theft of Ukrainian grain is confirmed by numerous testimonies of Ukrainian farmers and documentary evidence: the order of the so-called "Berdiansk City Hall" No. 10-p of 07.05.2022 to seize wheat and barley from a private company; press release of the Legislative Assembly of the Krasnoyarsk Territory of the Russian Federation No. 379 (13593) of 27.04. 2022 on the decision of the Committee on Rural Affairs and Agricultural Policy to expropriate crops from farmers from the temporarily occupied areas of Kherson region; proposals of the Ministry of Agriculture of Russia to postpone the introduction of the federal state information system (FSIS) for tracking the origin of grain and grain products for 1 year. The introduction of the Federal State Information System "Grain" was aimed at establishing control over the use of food resources in the territory of the Russian Federation, but due to Russia's military aggression against Ukraine, the already developed system has become undesirable for the Russian Federation due to the need to account for grain illegally exported from Ukrainian territory," the statement of our Foreign Ministry reads.                                                                

Gradually, in order not to completely discourage farmers from the occupied territories from working on the land and to maintain the appearance of "legality," the Russians limited direct theft of grain from warehouses and elevators, but instead, taking advantage of the hopeless situation in which local farmers found themselves, began to buy agricultural products from them for nothing. The purchase prices were often two or even three times lower than the cost of the crops they had grown. Having no alternative, farmers are forced to engage in such trade.

Thus, through direct robbery and price dictates, by the end of 2022, the occupiers had removed at least 1.8 million tons of grain from the occupied territories. It is clear that this figure is conditional. It is unrealistic to determine the actual amount of grain stolen from Ukraine and added to Putin's "stash," if you'll excuse the tautology. Let's also not forget that Russian looters have been actively exporting (and are still exporting) industrial crop seeds - primarily sunflower seeds - and processed products, including oil, from the south and east of Ukraine.           

The situation is the same with this year's harvest.

"There is a single Russian purchasing company that has the right to buy agricultural products and grain. And the cost is about RUB 3000 [now it is a little over UAH 1200] per ton. We understand that this cost is about two to three times lower than the cost of the grown products," Melitopol Mayor Ivan Fedorov told the FREEDOM TV channel.

By resorting to such forms of extracting raw materials from Ukrainian farmers, the Russian Federation has started its own export season with the largest wheat stocks in three decades. Unfortunately, Russia's own grain harvests have been good over the past two years. As Bloomberg reported, according to SovEcon, in July, Russia shipped 4.4 million tons of wheat for export, almost 60% more than usual. At the same time, the lion's share of transshipment was carried out not in the port of Novorossiysk, which is reached via traditional logistics routes from the "bread" regions of the Russian Federation, but through ports (including those "squeezed" from Ukraine) on the Azov Sea. No matter how much the occupiers hide it, this confirms the place of origin of the raw materials: south-eastern Ukraine.

Using a machine learning model that detects changes in texture and color based on time series of satellite images, Bloomberg analysts found that since the beginning of the full-scale invasion, Russia has stolen at least $1 billion worth of wheat from Ukraine alone. After all, almost a quarter of Ukraine's wheat is grown in the territories currently temporarily occupied by Russia.

Who doesn't care about the grain stolen by the aggressor

Unfortunately, it turned out that for many countries - not only those that openly supported Russia's aggression against Ukraine, but also those that declare a neutral position - the grain stolen from our farmers and the money earned through Russian dumping on it is not a problem. For example, Russia supplies Ukrainian grain to Syria without any "disguise." The Kremlin promised it to the leaders of a number of African countries as part of its demonstration of "Russian humanism" to the world.         

However, thanks to Ukraine's active actions in the international arena and, of course, fearing sanctions imposed on Russia by our partners, buyers are increasingly rarely resorting to direct purchases of stolen agricultural raw materials from Russia. Therefore, the Russians are trying to cover their tracks by concealing the origin of agricultural products. Mykola Gorbachev, president of the Ukrainian Grain Association, spoke about some of the schemes. According to him, even the countries under sanctions are cautious about buying grain stolen from Ukraine. In particular, there was a case when Libya refused to buy it. Therefore, it is indeed becoming more and more difficult for Russia to trade in stolen goods.

"Ships enter ports to pick up stolen grain like criminals - at night: they disable GPS trackers, pass through like invisible men, load up, and then leave in an unknown direction. However, the marine traffic program allows us to track where these vessels are going, how much and what they are carrying. Ukraine records all these facts," assured the head of the specialized association.

At the end of August, the Office of the Director of National Intelligence, which oversees 18 intelligence agencies, released a report submitted to the U.S. Congress on the impact of Russia's invasion on global food security and, in particular, on Russia's theft of Ukrainian grain, Voice of America reminds.

"Most of the cargo ships used to transport Ukrainian grain from the Russian-occupied territories were Russian. They often sailed along the coast of Turkey, eventually delivering cargo to Syrian ports, as well as to Israel, Iran, Georgia, and Lebanon," the report says. At the same time, the intelligence officers note: "We cannot confirm whether the buyers of the Russian cargo were aware of the Ukrainian origin of the grain."

Depending on the place of origin and storage, Russia is likely to mix "confiscated" Ukrainian grain with grain grown in Russia itself, making it difficult to determine the amount of raw materials stolen from Ukraine.

At the same time, it is quite clear that the purpose of such actions of the Russian Federation is not only to make money for the war in Ukraine on stolen Ukrainian grain, but also to limit the possibilities of our agricultural exports as much as possible. According to Mykola Gorbachev, by dumping stolen agricultural products and blocking supplies from Ukraine, the Russian Federation is trying to push us out of traditional markets. Unfortunately, the enemy has been partially successful so far, especially in the period from March to July last year, when the Black Sea Grain Initiative was not in effect.  The most striking example is Russia's active expansion in the Egyptian market. Having blocked maritime exports from Ukraine, the Russians actively dumped, intercepting contracts. This year, in August, Egypt became the largest buyer of Russian wheat, receiving more than 900,000 tons of such products. In money terms, this is about $250 million.

Experts also estimate that from March 2022 to the start of the grain corridor, Russia captured about 90% of the segment of the Chinese market that usually worked with Ukraine. Thanks to the grain corridor, the situation has been partially remedied. However, we are still far from reaching the pre-war volumes of our agricultural products to China. Especially after Russia withdrew from the grain deal in July this year.

In addition, in 2022, the aggressor country almost completely ousted Ukraine from the Indian sunflower oil market. Among other things, this was due to the sale of products stolen from the occupied territories and the processing of Ukrainian seeds at our and their oil extraction plants.

According to the Ukrainian Agribusiness Club, the share of Ukrainian grain exports to Africa decreased from 14% to 7%, to Asia from 19% to 12%, and to Southeast Asia from 13% to 4%. The main reason for these changes is the blockade of seaports. Before the war, Ukraine could export up to 7 million tons of grain per month by sea, while the maximum capacity of alternative routes was 3.7 million tons.

By the way, according to the UN, before the full-scale invasion, Russia and Ukraine together exported about 34% of the world's wheat, 17% of corn, and 73% of sunflower oil.

What should be the response to Russia's attack on global food security

The most telling thing about this - unfortunately, still unfinished - story is that in the case of the destruction and theft of agricultural products in Ukraine by the Russians, it was a deliberate, premeditated action that, according to international terminology, falls under the definition of genocide.

According to new evidence gathered by human rights experts, months before Putin ordered a full-scale invasion, Russia was actively preparing to steal Ukrainian grain stocks and provoke famine in the Ukrainian population. And the first attacks after February 24, 2022, the aggressor deliberately targeted primarily grain-rich areas, and the occupiers actively seized and destroyed the food production infrastructure," says a report by the international human rights law firm Global Rights Compliance.

GRC found out that a Russian defense contractor began purchasing trucks for grain transportation and purchased three new 170-meter dry bulk carriers in December 2021. This indicates advance planning for the looting of Ukrainian food resources "on an unprecedented scale." Russia began seizing Ukrainian farms less than a week after the invasion, and at its peak was exporting 12,000 tons of grain from the occupied territories every day.

Satellite images provided by the company to The Independent show grain trucks in a warehouse in Melitopol with license plates registered in occupied Crimea. Other images show railroad cars labeled "grain" leaving the Berdiansk railway station.

At the same time, Global Rights Compliance emphasizes that the Russian invasion has not only put many Ukrainians on the brink of survival, but has also affected millions of people around the world, increasing threats to global food security.

Investigators plan to submit all the evidence to the International Criminal Court, which will likely lead to the first international prosecution of Putin for the war crime of starvation as a method of warfare.

According to Global Rights Compliance partner Catriona Murdoch, it is "very likely" that Russia will be found guilty. This may result in another arrest warrant for Putin.

And this is one of the messages that Ukrainian diplomacy is trying to convey to the world from all international platforms.

"The criminal seizure, export and use of Ukrainian grain is yet another evidence of Russia's destructive actions, which, in particular, violate the basic principles of the Food and Agriculture Organization of the United Nations (FAO) - ensuring food security and overcoming hunger. Such a policy of the aggressor state calls into question the expediency of its membership in the FAO and other international organizations," the Ministry of Foreign Affairs of Ukraine emphasizes.

According to a US intelligence report, sub-Saharan Africa, as well as Afghanistan, Pakistan, Syria and Yemen, are particularly vulnerable to political instability, including threats to food security related to the war unleashed by Russia. According to analysts, Russia's invasion of Ukraine has caused perhaps the most destructive period in recent decades for global food security. Russia's actions, among other things, have led to higher prices for food and agricultural resources.

Through sanctions and other measures, the civilized world is trying to influence the aggressor. In particular, China has expressed its dissatisfaction with the Kremlin's destructive actions, which have already affected global food security. In July, Egypt, one of the world's largest wheat importers, criticized Russia's withdrawal from the Grain Initiative and said it would continue to import Ukrainian wheat. According to Egyptian Minister of Supply Ali El-Mosili, the country plans to continue receiving Ukrainian wheat through Europe.

And in late September, it was reported that Cairo had decided to abandon Russian grain altogether. But the unpleasant note in this story was that the reason for this step was not so much the solidarity of Egyptian partners with our country as the too high price at which the aggressor state wanted to supply grain (including the grain stolen from Ukraine). So, first of all, Cairo is counting on future grain supplies from France and Germany.

At the same time, according to the Financial Times, the European Union is considering the possibility of supplying grain and fertilizers to Egypt from Ukraine as part of an agreement on migration and economic support for Cairo.

"The details of the proposed deal are secret, but two EU officials said it could include a clause on food imports, which posed the biggest economic risk to Egypt and its 110 million people even before the conflict on the northeastern border [referring to the escalating confrontation between Israel and the Hamas movement]"

Despite these measures, Russia continues to make money on the grain expropriated from Ukrainian farmers. Petro Melnyk, CEO of Agricom Group and president of the Ukrainian Agribusiness Club (UCAB), believes that this year the volume of stolen Ukrainian grain will be lower. Firstly, all the carryover stocks from elevators were stolen by Russians last year, and secondly, farmers from the temporarily occupied territories significantly reduced their crop areas, and the opportunities for high-quality tillage and plant fertilization were limited. Nevertheless, we can talk about 3-4 million tons of grain ($750 million to $1 billion at current prices) from the temporarily occupied territories that Russia will potentially export this marketing season (until July 1 next year).

"If we do not stop this process soon, we will lose our raw materials and our money that should go to the budget every time. That is why we need specific and effective sanctions," Melnyk is convinced.

According to him, there should be a new approach to stop the stolen grain supply deals, not just imposing sanctions on people or ships.

Oleksandr Khara, an expert at the Center for Defense Strategies, believes that strengthening sanctions and going to international courts is a really important step for Ukraine that will help to partially solve the problem. Especially when it comes not only to additional sanctions pressure on Russia, but also on those who deliberately risk buying stolen grain from Russia.    

"A temporary answer may be to work with our partners to prevent Russians from selling stolen goods. The difficulty is that they sell grain not to Europeans, but to other countries, such as the Turks, who not only increase domestic consumption and processing of agricultural raw materials, but also act as distributors when selling it in the Middle East and neighboring markets. Unfortunately, they don't care whether it is stolen Ukrainian grain or grain grown in Russia, as long as the price is low. It is not easy to work with the Turkish side, because it does not recognize the facts of buying stolen grain: they say that Ukraine cannot prove that it is raw materials from the territories occupied by Russia," the expert said in a comment to Ukrinform.

He explains that it is indeed very difficult to prove this. Because the grain is harvested in the temporarily occupied territories, Ukraine has no access to documentation about its origin. Russians also mix their own grain with grain grown in the temporarily occupied regions. Just as they do to circumvent oil sanctions by mixing Russian carbohydrates with raw materials extracted elsewhere.

Therefore, according to Khara, the most effective counteraction to such trade should be military strikes that physically prevent agricultural exports from Russian and Russian-occupied Ukrainian ports. And, of course, it is important to prevent Russian attacks on our port infrastructure and on ships traveling through the humanitarian corridor.

"It would be right to impose a blockade of Russian ports on the Black Sea, which are the most important ports for grain exports and are also increasingly used for oil trade. This would be a symmetrical response to the illegal actions of the Russians," Mr. Khara said.   

Another example of retaliatory actions should be the introduction of joint monitoring of the turnover of grain that Russians steal and export from the temporarily occupied regions, which is currently being negotiated by Ukraine and the United Kingdom. Our other international partners should certainly be involved in such programs.

Vladyslav Obukh, Kyiv

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