The day after a Russian missile struck a Canadian-owned vegetable oil terminal in this southern Ukrainian city, police sealed off the surrounding streets, fearing the Russians might strike it again.
Forty-eight hours after the June 22 attack, the police were gone, and local residents rushed to fill plastic jugs from the shallow stream of vegetable oil that was mixing with dirt and trash in a gutter behind the facility.
The scene outside the Viterra terminal was a grim snapshot of the worsening global food crisis. Ukrainians filling their jugs with contaminated oil said they were driven to do so by skyrocketing costs at grocery stores. And the scorched storage tanks on the other side of the terminal’s metal fence portended a predicament that will only intensify as this war grinds on.
Russia’s strategy in hitting sites such as the Viterra facility is obvious to Danylo, an eighth grader who lives just 300 metres from the facility and spends every afternoon with his friends at a playground directly adjacent to the terminal.
“The Russians want to create food shortages, like they did in Mariupol,” said the 14-year-old, who was home at the time of the attack and shot a video of orange flames and black smoke shooting skyward. “They hit the oil refineries, they hit the grain deposits. Some of these [Viterra] tanks are still full, so maybe they’ll hit it again.”
The teenager’s analysis aligns with the Kremlin’s own description of its plans. The aim is to create shortages, drive commodity prices up and force the West to reconsider supporting Ukraine.
“There is a very cynical joke – not even a joke, just an outcry – in Moscow. I’ve heard it several times from different people. It goes like this: ‘All our hope is on the famine,’” Margarita Simonyan, the editor-in-chief of the Kremlin-run RT network told an audience on June 20 at the St. Petersburg International Economic Forum.
“Here’s what it means,” she continued, with Russian President Vladimir Putin sitting beside her on stage. “It means the famine will start now, and they will lift the sanctions and be friends with us because they will realize it’s impossible not to be friends with us.”
So far, the West is holding firm. The G7 summit in Elmau, Germany, ended this week with a declaration that firmly blamed Russia for rising commodities prices – and a vow not to give in to such tactics.
“Russia’s aggression is impeding the global recovery and dramatically worsening energy security and access to food globally,” read the final communiqué, which included a promise to inject US$4.5-billion to combat rising food prices via a new World Bank initiative, the Global Alliance on Food Security. Nonetheless, the G7 said sanctions against Russia would remain in place “for as long as necessary.”
The expanding list of sanctions has seen Russia largely cut off from the global banking system, forcing it to default on a foreign debt this week. Moscow had the reserves to make the US$100-million payment, but the sanctions made it impossible to transfer the money to its creditors.
Many Western countries have either banned the import of Russian oil and gas – the Kremlin’s main sources of income – or have committed to phasing them out by the end of this year. Leading Western brands have pulled out of Russia since the war began on Feb. 24, and the World Bank has forecast that the country’s economy will shrink 11.4 per cent this year.
The economic crunch, then, is likely to be both painful and prolonged on both sides. The price of oil has surged from about US$70 a barrel at the start of the war to more than US$110. Meanwhile, the Food and Agriculture Organization’s Food Price Index, which tracks the value of a basket of commonly traded foods, shot to a record high of 159.3 in March. It has eased down slightly since then, but in May was still 22 points higher than at the same time last year.
Since the start of the war, Russia’s navy has maintained a blockade of the Black Sea, preventing Ukraine – one of the world’s largest exporters of wheat – from getting its product to market. Some 22 million tonnes that would normally be exported via Mykolaiv and other Ukrainian ports remain in storage facilities around the country. The critically needed grain will likely soon go to waste.
Gennady Ivanov, the director of BPG Shipping, a Dubai-based shipper of dry goods, said Russia appears to be attacking Ukraine’s ability to resume exporting after the war. “In terms of affecting commodity prices, it’s enough today to keep ports blocked and mined” instead of firing expensive missiles at infrastructure. “I assume, by destroying the port terminals, that there is a plan to significantly weaken the export potential of Ukraine in the future.”
Another Ukrainian shipping industry executive warned that if the war were to continue, this year’s entire crop – 40 million tonnes – would also be in jeopardy, and Ukrainian farmers might not even be able to plant seeds the following year. The disappearance of more than 60 million tonnes of grain from the world market would be felt around the world, he said, arguing that Mr. Putin’s message basically boils down to a ransom note: “You have to force Ukraine to surrender and then everything will be fine.”
The Globe and Mail is not naming the shipping executive because he was not authorized by his company, a major international firm, to discuss the situation.
Ukraine has also accused Russia of seizing some 400,000 tonnes of grain from areas under occupation. It’s unclear whether the stolen grain was destined for domestic Russian consumption or would be sold internationally.
Rising food prices will hit hardest in some of the world’s poorest countries. Lebanon, a country already in deep economic crisis, imported more than 80 per cent of its wheat from Ukraine in 2020. Libya, Tunisia and Pakistan all relied on Ukraine for roughly half their supply. Bread prices have shot up in Yemen, which was already facing a famine amid its 11-year-old civil war.
Ukraine is also the world’s largest exporter of sunflower seed oil, so the war has led to worldwide shortages of that staple too.
Russia says the solution is simple: If Ukraine stops fighting, the blockade will end, and so will the food crisis. The Ukrainian government is begging the world not to give in to Mr. Putin’s blackmail.
“If it was not for the Russian war against Ukraine, there simply would be no shortage in the food market,” Ukrainian President Volodymyr Zelensky said in a virtual address to leaders of the African Union on June 20. From the start of the war, Mr. Zelensky has argued that the only way to end the conflict is for Ukraine’s allies to give it the weapons it needs to make Mr. Putin realize he can’t conquer Ukraine militarily. “The food crisis in the world will continue as long as this colonizing war continues, Russia’s war against our state, and as long as our ports are blocked.”
Some analysts have placed hopes in a negotiated solution that could see Russia partially lift its blockade to allow Ukraine to export grain to the international market – perhaps with the cargo escorted by foreign navies. “There’s hope that there can be an agreement reached that would quickly alleviate some potential food shortages,” said Seth Goldstein, an analyst with Morningstar, a Chicago-based market research firm.
But Ukrainian officials dismiss the idea as “crazy,” since it would require a massive demining effort – four months of storms have moved both sides’ mines around the Black Sea – in the middle of a shooting war.
Commander Natalia Humeniuk, a spokeswoman for the Ukrainian military’s southern region, said Russia has shown no sign that it is interested in helping get the grain to market. “As soon as there was talk of unblocking the ports, they increased their attacks on food targets and places that are essential to food exports,” she said in an interview outside the Officers’ Building in the port city of Odesa.
Yuriy Vitrenko, the chairman of the board of Naftogaz, Ukraine’s state-owned oil and gas company, sees rising energy prices as part of the same pressure campaign. Russia’s relentless attacks on refineries and oil storage depots – combined with the closure of Odesa’s port and the loss of imports from Belarus, which has sided with Russia in the war – have deprived Ukraine of 98 per cent of its usual supply of oil and gas, he said. That’s left the country scrambling for alternative suppliers – and worrying about shortages next winter.
Mr. Vitrenko said Russia actually began driving energy prices up before the start of the war, hoping to convince the West to give in to Mr. Putin’s demands for a halt to the eastward expansion of NATO and submit to Moscow’s terms on Ukraine.
“They thought that with these high prices, the West would accept it,” Mr. Vitrenko said in an interview at his office in Kyiv. “They have this leverage on the West, because the West needs Russian energy. Even if, for example, you’re not importing Russian energy, the global prices depend on the supply of Russian energy. Higher prices mean higher inflation, unhappy electorates and political challenges for the existing elites. That’s why [Russia thinks] the existing elites should accept the request from Mr. Putin to change the world order.”
With Russia often firing dozens of cruise missiles a day at targets in Ukraine, the attack on Viterra’s terminal stood out simply because it was a foreign-owned target. The company, however, seemed keen to give the incident as little publicity as possible, refusing requests from The Globe to visit the damaged facility or interview the employee the company said had been injured in the missile strike.
Viterra is partially owned by Glencore, an Anglo-Swiss commodity trader that owns a 10.5-per-cent stake in En+ Group, the parent company of Russian aluminum giant Rusal. Glencore also owns a 0.57-per-cent share of Rosneft, the Kremlin-controlled oil giant.
The fate of the injured Viterra employee is something of a mystery in Mykolaiv. The city’s ambulance dispatcher told The Globe that they received a call for medical help to be sent to the scene of the explosion on June 22, and a local hospital was alerted to expect a patient suffering from burns. But when the ambulance arrived, there was no one at the facility requesting treatment.
The toll from the attack could have been far worse. The facility is embedded in a residential neighbourhood, with a line of homes just 15 to 20 metres from the outer wall of the complex, which contains four massive storage tanks.
One of the tanks sustained a direct hit, but local residents said the flames shot straight up into the air, which likely spared many lives. Instead of mass casualties, the neighbourhood was blessed with free, if dirty, cooking oil running in the streets.
“This would cost 100 hryvnia [about $4.37] in a store,” said Oleksandr Kuzmin, a 31-year-old casual labourer who said he had no work at the moment. He was hoisting one of three five-litre jugs he’d managed to fill. “We’re in a time when prices don’t connect with salaries and pensions.”
He was aware it might not be usable for food. But with no end in sight to the war, he said, he could think of other uses. “If it’s not safe for cooking with, I’ll use it to make Molotov cocktails.”
With reporting by Niall McGee
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