Access to SWIFT in exchange for food
The words of Russian dignitaries about the reluctance to renew the grain deal have never sounded so menacing before July 17, the date by which decision on the further participation of our country in this Black Sea initiative. Intrigue was added to the situation by the publication of the Financial Times (FT) newspaper about the study by the European Union of Moscow's proposal to allow the sub-sanctioned Rosselkhozbank to create a «daughter» that can be connected to the SWIFT international transfer system to pay for grain exports. Experts argued whether it would be possible to reach an agreement this time.
From the high rostrums, they have repeatedly stated the desire of our country to withdraw from the grain deal, since Russia's requirements are not being met. This was pointed out in recent weeks by Deputy Chairman of the Security Council of the Russian Federation Dmitry Medvedev, and Foreign Minister Sergei Lavrov, and Presidential Press Secretary Dmitry Peskov.
To all appearances, they did not ignore the statements from Moscow this time in Europe, as it was before. Thus, the FT article notes that the EU authorities are considering the possibility of allowing the Russian Agricultural Bank (RSHB), cut off from SWIFT due to sanctions, to create a “daughter” that will be connected to this system. The Europeans see this scenario as the “least worst case scenario,” but the issue is complicated by the fact that we are talking about a completely state-owned bank. According to Associate Professor of the Department of Corporate Governance and Innovation of the Russian University of Economics. Plekhanov Maksim Maksimov, RSHB is the basis for the technical maintenance of the export of domestic agricultural products to world markets. Unfriendly countries categorically refuse to pay for these deliveries in rubles or another currency acceptable to our side. In this regard, settlements can only be made in dollars or euros, which requires the RSHB to be connected to SWIFT. True, it should be recalled that on June 23, the EU issued a communiqué stating that in principle it was not considering the possibility of reconnecting Rosselkhozbank to SWIFT, and was waiting for the execution of the Grain Deal without additional conditions, the expert recalled.
The official representative of the Kremlin, Dmitry Peskov, also pointed out the strange thoughtfulness of the European Union, allegedly interested in extending the grain deal. “So far, we have nothing to report on the implementation of that part of the agreement that concerned the Russian side,” he said, commenting on the FT article. Peskov added that «there is still some time before the deadline, but there is not much hope.»
According to Natalia Milchakova, a leading analyst at Freedom Finance Global, a compromise solution is unlikely to be found this year. The only beneficiary of the deal, if it took place, would be Turkish President Recep Tayyip Erdogan, but on the eve of the elections he already received all possible political «dividends» from this initiative.
“Most likely, further events will develop in this way: EU officials will say that it is necessary to extend the grain deal, but will not offer any specific ways to solve it that would suit Russia,” the expert predicts. According to the UN, Russia's share in world wheat exports until last year was 20%, Ukraine — 10%.
Due to the stalled grain deal, the world receives less than 30% of wheat from these two countries, and this, accordingly, leads to an increase in prices for flour, bread and other food products. And in the EU, inflation remains high for this zone, since it artificially created a food shortage, Milchakova notes.
But if Russia withdraws from the deal or gets its way this time, it will only win. “On the world market, the price of wheat has almost halved since May last year,” recalls Maxim Osadchiy, head of the analytical department of BKF Bank. “Russia, as the largest exporter of wheat, is interested in raising prices for it, the threat of refusal to extend the deal will allow us to increase income from grain exports.” In addition, the grain deal is an instrument of influence on Western countries, the use of which makes it possible to reduce sanctions pressure on Russia. If it is possible to “push through” them — to achieve the connection of the RSHB to SWIFT, then further new requirements can be set. Although analysts do not rule out that our country may once again extend the grain deal without fulfilling new conditions due to its unwillingness to aggravate geopolitical problems and spoil relations with Turkey and the UN, which are the guarantors of the agreements.