- 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 deal that allows food exports out of Ukraine.
It almost feels like 2022 again.
Russia just killed the Black Sea grain deal, and there are once again warnings that Europe may face a natural gas crisis this winter if the Kremlin decides to cut supplies.
"The Black Sea agreements are no longer in effect," Kremlin spokesman Dmitry Peskov told reporters on Monday, according to TASS, a Russian state news agency.
The grain deal that expired Monday allowed food and fertilizer to be transported out of three key Ukrainian ports, despite a Russian blockade. The deal was struck in July 2022 to allow Ukraine to continue exporting its food products to the global market amid an ongoing global food crisis.
To put this in context, the UN had convinced Russia to agree to the Black Sea grain deal last year by dangling a sweetener — the group would help smooth Russia's food and fertilizer exports amid sweeping sanctions which didn't target these essential goods.
But Moscow said Western sanctions such as those targeting payments and insurance are still making it difficult to export Russian produce. As a result, the Black Sea grain deal was scuppered.
Ukraine and Russia are major wheat exporters, so prices of grain surged to record highs when the war started over 500 days ago. Prices fell back to pre-war levels when the Black Sea grain deal was struck.
And predictably, Russia's decision to not renew the deal on Monday sent wheat prices spiking by over 3%.
We also appear to be back to square one with another commodity — natural gas.
Europe largely managed to avert an energy crisis last year thanks to a warm winter, but there's no guarantee it'll be so lucky this year. There are once again fears that Europe's energy stockpiles could be threatened this year if Moscow cut supplies to the continent.
On Monday, the International Energy Agency, or IEA, warned of "major uncertainties" for Europe ahead of the winter, echoing the panic energy markets faced just after Russia invaded Ukraine.
"A cold winter, together with a full halt in Russia 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 Northeast Asia experiences colder-than-usual weather and economic growth is stronger than expected in China."
The European Union has cut its reliance on Russian gas dramatically — the bloc used to get around one-third of its supplies from Russia before the war — but that amount has dropped to about 10% by November 2022, according to EU data.
This is partly also because most gas flows via the key Nord Stream 1 pipeline have been halted after a major explosion.
While the EU has been snapping up liquefied natural gas and storing the fuel ahead of summer and winter — the two seasons when usage typically surges for cooling and heating purposes — even "full storage sites are no guarantee against market volatility during the winter," the IEA said.