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May 27, 2022
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Kyiv proposed to remove Russia from the world grain market by cartel

Kyiv proposed to remove Russia from the world grain market by cartel

: Rogulin Dmitry / TASS

The idea of ​​creating a “grain OPEC” can be revived – this time at the suggestion of “Nezaleznaya”. According to the Ministry of Agrarian Policy of Ukraine, the country’s leadership is discussing with the leading grain-producing states the idea of ​​creating an international industry association “in order to protect their interests in the world market.”

According to Kommersant, the United States, the EU, Canada, Brazil, Argentina, and Ukraine may enter OPEC for Grains. Of course, Russian participation in the activities of this structure is categorically unacceptable for Kyiv.

This idea is a logical continuation of the idea of ​​creating an alliance to ensure global food security, announced during the talks of the G7 development ministers held on May 19. During them, the German Chancellor Olaf Scholz announced the need for a structure for creating a system of world food security, which he expectedly accused Moscow of undermining.

The current situation arose after difficulties with the export of grain from Ukraine due to hostilities on its territory. At the same time, Russia points out the difficulties of the sowing campaign in the country, which can lead to a decrease in crop volumes and, as a result, food shortages.

Previously, proposals to create an association of grain producing and exporting countries were repeatedly expressed by their politicians. So, in 2007, the Minister of Agriculture of Russia Alexey Gordeev proposed to create such a structure with the participation of the Russian Federation, Ukraine, Kazakhstan. However, this initiative did not receive adequate support.

Agrarian expert, CEO of the SovEcon analytical center Andrey Sizov expressed surprise at the proposal of the Ministry of Agrarian Policy of Ukraine.

— I have been analyzing processes in the agro-industrial complex for three decades, but I have little idea what the point of this initiative is. It just doesn’t exist. Ukraine periodically makes some statements, but I can call this extremely ill-conceived. OPEC was created to maintain high oil prices, everything is built there for this purpose. What’s the point here? The cost of grain is on the rise.

“SP”: – Kyiv declares its desire to stop the threat to food security.

In fact, there is always such a threat. According to the UN, last year there were about 200 million hungry people on the planet. And loud statements will not help here.

“SP”: – In Kyiv, apparently, they believe that for this purpose it is necessary to export grain abroad by sea.

— Of course, the sea route for the export of agricultural products is very important for Ukraine. By land – by rail or by road – it exports only one sixth or one seventh of its total exports, the rest is exported by sea. In general, the grain market has already reacted to the Ukrainian situation – prices have risen by 50-60 percent. How long and to what indicators they will increase depends on the duration of the special military operation.

“SP”: – Which countries can replace Ukraine in the grain market?

“It all depends on the cultures. Let’s say, for some positions, these are Russia, Argentina, the United States. For corn, most likely the United States and Brazil.

Deputy Chairman of the MCCI Committee for the Development of Entrepreneurship in the Agro-Industrial Complex and CEO of Petrova 5 Consulting Marina Petrovaon the contrary, he considers the creation of a grain cartel quite realistic:

– In the current situation, when the threat of a food crisis is almost inevitable, the creation of a “grain OPEC” can be called a logical step on the part of the largest exporters of grain crops.

“SP”: – Why did previous proposals to create such a structure fail?

– If we consider the world economy and the principles of its formation, then they were formed taking into account the following rules: first of all, the principle of globality, the principle of openness and the laws of the market. In such a situation, the creation of an additional regulatory body was not required, because the so-called law of communicating vessels was in effect.

Today, the situation on the world food market is significantly different in that Russia remains one of the leaders in the export of grain crops. In the new reality, the intention to create a “grain OPEC” is an attempt in the medium term to neutralize Russia’s influence in this market as well.

“SP”: – What could be the motives of the Ukrainian initiative?

– Ukraine is the second country in the world in terms of grain exports, the third in the supply of oils and fats. At the moment, the export of grain from the territory of Ukraine is impossible due to the blocking of ports. This explains everything.

However, according to economist Nikita Krichevskythis proposal of Ukrainian politicians cannot be called realistic.

– They are guided by some false motives, putting forward it. Clearly, the Organization of the Petroleum Exporting Countries, OPEC, is taken as a kind of role model. The “oil OPEC” countries account for about a third of world oil production, and the “OPEC plus” association accounts for about half. Russia gives a powerful increase in the total volume of oil produced. And here Ukraine proposes to “brush off the table” the leading producer and exporter of grain crops. And offers to play without him. This is not the case in economics. In addition, Kyiv forgets that OPEC is a cartel.

“SP”: – What does this mean if you transfer its rules to the grain market?

“He regulates prices and production volume quite strictly by internal agreements. A stable mechanism has been built there that makes it possible to maintain oil prices. But agriculture is not oil production; here a lot depends on weather conditions. For example, in Europe there will be a drought or there will be cold weather, because of which a poor harvest will be harvested, and in America, on the contrary, the yield will break records. In Ukraine, last year there was a great harvest, and the year before last, not so much. By cartel logic, she should be penalized for not harvesting enough grain, which would cause price fluctuations in the market.

“SP”: – The weather factor is the main one?

– Right. But not the only one. There are still losses from grain storage. There are many countries where, almost literally, they tremble over every grain. At the same time, we do not see this in Russia and Kazakhstan, due to objective and subjective reasons. That is, some indicators can be at the input, when harvesting, and completely different – at the output, when grain is shipped. But there are still volumes of sown areas for various crops: wheat, rye, barley, corn. How to take them into account in the cartel?

“SP”: – That is, there is no economic sense in the initiative of Kyiv?

— No, this is a purely political statement that has nothing to do with the real economy. I don’t think it’s worth paying attention to such proposals coming from a state that is in the process of half-life.

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