Russia’s pullout this week from the Black Sea grain deal has again sparked global concerns about global food, fuel, and fertilizer security, but the effects on India may be less dramatic, analysts said.
A strategic resource diversification towards Latin America may help New Delhi secure its edible oil supply chain and help it emerge relatively unscathed from Russia’s move, analysts said.
The Black Sea Grain Initiative came into force in July last year, and ensured a secure route for grain exports from three key Ukrainian ports in the Black Sea – Odesa, Chornomorsk, and Yuzhny/Pivdennyi.
The Russian military intervention in Ukraine in February last year had led to a blockade of the Black Sea, leading to a significant decline in Ukraine’s exports.
As the largest exporters of foodgrain, Russia and Ukraine’s blockade due to the conflict led to a sharp rise in global food prices. Consequently, in response to escalating food prices, the UN, in collaboration with Turkey, Russia, and Ukraine, initiated the grain deal.
The agreement was reached to help prevent potential famines by infusing more wheat, sunflower oil, fertilizer and other commodities into global markets, while also catering to humanitarian needs.
India’s sunflower oil imports from Ukraine grew to 409,944 tons between November 2022 and June 2023 from 342,955 tons in the year-ago period, data from Solvent Extractor Association of India (SEAI) showed.
However, during the same period, India expanded its sunflower oil imports from Argentina and Brazil, resulting in increased imports of 233,335 tons and 12,000 tons, respectively, compared to 180,456 tons and 980 tons, respectively in 2022.
Imports of soybean oil from these Latin American nations have also been rising, SEAI data showed.
India’s soybean oil imports rose to 973,000 tons during November 2022 to June 2023 from 720,000 tons during the same period in the previous year.
Meanwhile, sunflower oil imports fell to 190,000 tons last month from 295,000 tons in May, while soybean oil imports were at 437,000 tons last month against 900,000 tons in May and 295,000 tons in June last year.
Meanwhile, despite improved domestic availability, the imports of crude palm oil, RBD Palmolien, and soybean oil rose this June, data showed.
SEAI executive director B.V. Mehta said, “As far as Indian demand for edible oil is concerned, we have adequate stock to support our domestic consumption.”
However, it’s not all smooth sailing.
The Federation of Indian Exporters Organization (FIEO) warns of a potential surge in global prices for sunflower and soybean oil, as well as wheat.
“Out of total imports from Ukraine, around $1.7-1.8 billion is sunflower oil and seeds imports in value terms. Sunflower oil is used for commercial purposes, mostly in canteen and restaurants, and is easily replaceable by other options like palm oil; so suspension of Black Sea grain deal will not affect Indian oil imports from Ukraine,” Ajay Sahai, director-general of FIEO, said.
Russia’s suspension of the deal will worsen global food security issues, and fuel and fertilizer supply-chain difficulties, especially in the Global South, analysts said.
The term ‘Global South’ is used to refer to developing countries, primarily located in the southern hemisphere, that face similar economic and developmental challenges.
Anil Trigunayat, India’s former ambassador to Jordan, Libya, and Malta, said Russia’s exit from the Black Sea grain deal could escalate geopolitical tensions and potentially exacerbate the Eurasian conflict.
“The suspension will have a major impact on food security in several countries and regions while decimating access to markets in Ukraine,” Trigunayat said.
The Black Sea grain deal has enabled the export of about 33 million tons of food commodities from Ukraine to multiple countries in the past year, data showed.
Efforts to weaponize food, fuel, and fertilizer must be depoliticized,” Trigunayat, who has also served as deputy head of mission in Moscow, said.
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