Unveiling Russia's Trade Dominance: How Grain Exports Quietly Undermine Ukraine

In April 2022, Dmitry Medvedev, the former President of Russia who now serves as the deputy head of Russia's Security Council, conveyed on his Telegram channel that "Our food acts as our quiet weapon. It may be silent, but it is undeniably powerful."

However, the silence surrounding this weapon has been broken. Russia is anticipated to achieve an exceptionally abundant wheat harvest for the second consecutive year, and it is employing this abundance to undermine Ukraine and establish its influence on a global scale.

Despite claiming that Western sanctions have crippled its food exports, Moscow has seen a significant increase in its share of the global wheat market since its full-scale invasion of Ukraine in February 2022. According to data shared by S&P Global with CNN, Russia is expected to export 47.2 million metric tons (52 million tons) of wheat in the current season, which began in the summer. This represents a market-leading share of 22.5% of global wheat exports. Two years ago, Russia only exported 32.6 million tons, accounting for 16% of the market.

During this period, Ukraine's global wheat exports have decreased from 9% to a projected level slightly above 6% for the current season. The words and actions of Moscow indicate a clear intention to undermine Ukraine's status as one of the leading wheat exporters worldwide. This strategy aims to restrict Ukraine's economy and indirectly weaken its capability in military conflicts.

"Our country has the capability to replace Ukrainian grain, both through commercial means and as humanitarian assistance to countries in need," stated Russian President Vladimir Putin during the BRICS summit in late August.

These remarks were made shortly after Russia withdrew from the Black Sea Grain Initiative, a program that had previously guaranteed the secure transport of grain from Ukrainian ports. Since the termination of this agreement, Moscow has intensified military attacks targeting Ukraine's export facilities. These attacks have caused significant damage to grain silos and infrastructure at Ukraine's sea ports and its Danube river ports. It is worth noting that these ports serve as an important alternative route for exports and have no military significance.

Caitlin Welsh, director of the global food and water security program at the Center for Strategic and International Studies, stated that their objective is to completely eliminate Ukraine's agriculture sector. This would be a significant gain for Moscow, considering the sector's importance to Ukraine's economy. Prior to the invasion, agriculture contributed 11% to the country's gross domestic product.

"Ukraines [grain] exports are vital to its economy and to feed the world," Bridget A. Brink, the US ambassador to Ukraine, wrote Monday on X, formerly known as Twitter.

Wheat as soft power

However, experts assert that Russia's motivations extend beyond economic warfare against its neighbor. They argue that Putin's emphasis on "free aid to needy countries" demonstrates Moscow's intention to foster alliances with the developing world, particularly African nations. Although many of these nations have refrained from condemning Russia's actions in Ukraine, they have expressed disapproval of its withdrawal from the grain deal.

According to Andrey Sizov, the head of SovEcon, a consultancy for the wheat and corn industries, the 300,000 metric tons of grain that Russia pledged as aid to several African countries at the end of July is more focused on PR than genuine generosity. Sizov highlights that this quantity is a very small fraction compared to Russia's monthly exports and the actual needs of Africa, which he estimates to be around 8 million tons per month. "Russia is seeking positive publicity, but the amount they are providing is incredibly limited," he informed CNN.

Farmers harvest wheat in the settlement of Nedvigovka in southern Russia in July.

The withdrawal of Moscow from the grain deal has posed a significant challenge to Europe's collective support for Ukraine. Just three days after Russia's departure, which resulted in the agreement collapsing, five European Union countries situated near or on Ukraine's border addressed a letter to the European Commission, the executive branch of the EU, requesting an extension of the temporary ban on the import of Ukrainian grain into those nations until the year's end.

Fearing an influx of Ukrainian grain being exported over land to neighboring countries, including Poland, and the possibility of some of the transit grain being sold in these countries, local farmers' livelihoods were at risk. The EU's refusal to extend the curbs led to unilateral import bans issued by several countries, escalating tensions between Ukraine and its staunch ally Poland.

Russian gains from potential disunity, as well as the burden on EU resources through its support of alternative routes for Ukrainian grain, according to Welsh. Consequently, the tensions between Ukraine and Poland have subsequently diminished.

Falling prices

Russia's wheat exports are reaching unprecedented levels. The US Department of Agriculture estimated in May that Moscow would export a record-breaking 45 million metric tons of wheat during the 2022-23 season. This aligns with S&P Global data, which projects 46.1 million metric tons for that season, a quantity expected to be surpassed by the amount to be shipped in 2023-24.

Wheat prices have seen a decline after a brief increase following the invasion, reaching their lowest point in over three years by the end of last month, although they remain higher than the majority of the past ten years. As a result, Russia's impressive export numbers do not necessarily translate to record earnings.

SovEcon's Sizov highlights that Moscow has been attempting to establish an unspoken minimum for wheat export prices. In March, Reuters disclosed information from two sources, reporting that the Russian government urged exporters to guarantee payment to farmers at a level that would cover their average production expenses.

But Russia is facing competition from other players as well. Romania recently won a highly anticipated wheat tender to supply Egypt, offering a price of $256 per ton, while Russian sellers quoted $270.

Combine harvesters harvest wheat in the Siberian Novosibirsk region in September.

Vladimir Nikolayev/AFP/Getty Images

Paul Hughes, the chief agricultural economist at S&P Global, thinks that Russia will face a significant challenge if wheat sellers in the EU, another major wheat exporting country, decrease their prices. He mentioned to CNN that Russia will then have two options: either maintain their export price floor and lose export share to the EU, or abandon their floor, reduce prices, and sustain their export pace. He referred to this potential situation as a critical moment.

Ukraine, where around 8% of its farmland is currently unusable due to the war, is facing a difficult situation. According to S&P Global, the country's wheat exports are projected to decline by 3.7 million tons to 13.4 million in 2023-24, reaching the lowest level in nine years. This decrease in global wheat supply might potentially lead to an increase in prices, as noted by Welsh.

The harvesting of Ukraine's crops usually takes place from late summer to fall, with exports occurring from November to February. Welsh points out that if Ukraine's access to its ports remains limited during its peak export season, the global market could experience significant impacts.

And if wheat prices rise, Russia will be well-placed to reap the benefits.

Olesya Dmitracova and Svitlana Vlasova contributed to this article.