The Grain Corridor Agreement And Turkiye As A Foreign Investment Destination

October 11, 2022 by Middle East Briefing

Turkey’s Mediating Role İn Preventing A Global Food Crisis Underlines Corporate & Trade Responsibility

By Selim Ural, Kulat Law Office Istanbul

The Russia-Ukraine war, which started in February 2022, has had a significant impact on the global markets due to the large shares of the two countries in the global agricultural products trade, and left several import-dependent countries experiencing rapid population increases at the risk of starvation. The already existing rise in food prices accelerated in the first days of the war, increasing the food shortage risks. According to the data of the International Grain Council, the price of wheat in the world markets increased with the invasion of Ukraine by Russia. Compared to the January 2022 period, wheat prices increased by 40 percent during the year. With the announcement of the grain corridor agreement, prices entered a downward trend. At the beginning of September, wheat prices decreased to the level of January 2022. The same trend was observed in corn prices. Corn prices, which started to increase in February 2022, started to decline in July 2022.

According to the statement made by the Turkish Ministry of National Defense, on July 22, 2022, Turkiye, Russia, Ukraine and the United Nations signed “The Initiative On The Safe Transportation Of Grain And Foodstuffs From Ukrainian Ports” also called “The Black Sea Grain Initiative” in Istanbul. With the Joint Coordination Center in Istanbul starting its operations on 27 July, the first ship was moved from Odessa Port in Ukraine on 1 August 2022.

With the announcement of the grain corridor agreement, prices entered a downward trend and wheat prices fell to the level of January 2022 at the beginning of September.

The liberalization of trade with the Grain Corridor Agreement has three most important effects:

First effect is that reducing the risk of malnutrition and hunger of the population in developing and underdeveloped countries

The second effect is that it prevents social problems, especially a new wave of migration

The third effect is the supply of chemical fertilizers that will be needed in the coming production periods worldwide.

The Amount Of Cargo Carried Through The Grain Corridor Exceeded 6 Million Tons

As of early October 2022, 260 ships have departed from Ukrainian ports, and the amount of grain transported has exceeded 6 million tons. Food products such as corn, wheat, sunflower meal, sunflower oil, sugar beet, soy, peas and barley are transported by ships thanks to this Corridor. It was also stated that during the month more ships will depart from Ukrainian ports.

Up to this point, Turkiye carried out a multi-layered foreign policy during the Russia-Ukraine war. The mediating role played by the country in the grain corridor negotiations can also be seen as part of Turkiye’s latest diplomatic offensive. In this sense, we are witnessing that Turkiye is moving towards a line where soft power elements are used in a more balanced way compared to the foreign policy line in which hard power elements and security come to the fore. This successful mediation in wheat corridor negotiations, especially with his Western allies, helped to normalize relations that had been damaged in recent years and has given Ankara more visibility in the international arena.

Turkiye’s Export Figures in September

According to the Minister of Trade, Turkiye’s exports increased by 9.2 percent compared to the same month of the previous year and reached US$22.6 billion. In addition, the Minister said that this figure is the highest September export figure to date. He also stated that exports in the January-September period of 2022 showed a strong performance, with an increase of 17 percent compared to the same period of the previous year, reaching US$188.2 billion. Excluding gold and energy, the ratio of exports to imports exceeds 100 percent in September. In this case, the Grain Corridor helped calm the markets and contain food inflation.

Turkiye’s moderate and mediator foreign policy creates a safe environment for investors. In this way, there is no food or energy crisis waiting for Turkiye, and the country’s mediator role in the Ukraine and Russia War has increased Turkiye’s strategic position. In fact, thanks to the grain corridor, an important food crisis in the world has been prevented and Turkiye is now regarded as an alternative safe route for natural gas flow. Turkiye, as a NATO ally, is also an important model in the protection of the international trade network by not breaking diplomatic communication with Russia. In this way, investors in Turkiye will have the opportunity to continue their trade with Europe without stopping their commercial relations with Russia. This is a unique opportunity in the world for investors, who are considering exports on a regional basis without being impacted by sanctions, an important issue to consider when viewing Turkiye as a trade and investment destination.

Sources:

We are grateful to Selim Ural, of the Kulat Law Office in Istanbul, for contributing this article.

Topics

Middle East Briefing

The Grain Corridor Agreement And Turkiye As A Foreign Investment Destination

Turkey’s Mediating Role İn Preventing A Global Food Crisis Underlines Corporate & Trade Responsibility

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