The European Union is considering allowing the sanctioned Russian Agricultural Bank (Rosselkhozbank) to establish a subsidiary to reconnect to the worldwide financial network as an incentive for Moscow to extend the Black Sea grain deal that allows Ukraine to export food to global markets, the Financial Times said on Monday.
Last week, Russia said that it saw no reason to extend the Turkish- and U.N.-brokered deal beyond July 17 because the West had acted in an "outrageous" way over the agreement, though it assured poor countries that Russian grain exports would continue.
Moscow remained pessimistic on Monday about the prospects of renewing the wartime initiative because no progress has been made in implementing accompanying agreements that pertain to Russian exports.
Kremlin spokesperson Dmitry Peskov told a briefing there were "not too many hopes" it would be extended.
Moscow's plan, proposed through U.N.-brokered talks, would let the bank unit handle payments related to grain exports, the Financial Times said, citing unnamed sources.
The new unit would be allowed to use the SWIFT global financial messaging system, which was closed to the most prominent Russian banks after Russia invaded Ukraine, it added.
Responding to the report, Ukraine's Foreign Ministry ambassador-at-large, Olha Trofimtseva, said the EU wanted "to facilitate the grain deal somehow."
"On the one hand, any opportunities for agricultural exports are good. On the other hand, making concessions to a blackmailer means encouraging him to continue blackmailing," she wrote on the Telegram messaging app.
"It is a well-known axiom: a blackmailer does not stop if you fulfill his demands. He just comes up with new demands."
There was little immediate reaction in global grain markets on Monday with wheat prices virtually unchanged.
"There is general belief in the market that the Ukrainian shipment deal will not be extended unless Russia gets substantive concessions," one European grains trader said.
"Easing the banking sanctions would be a quick method of giving Russia something," the trader said, adding there remained many doubts about whether the deal would be extended.
'Not much hope'
The wartime deal, brokered by the United Nations and Türkiye in July 2022, aimed to prevent a global food crisis by allowing Ukrainian grain trapped by Russia's invasion to be safely exported from Black Sea ports. It was agreed for an initial 120 days and has been extended three times since last July but is due to expire later this month.
Last week, the U.N. said it was concerned that no new ships had been registered under the initiative since June 26 – despite applications made by 29 vessels.
More than 32 million tons of mostly corn and wheat have been exported by Ukraine under the deal.
As two of the world's top agricultural producers, Russia and Ukraine are major players in grain and oilseed markets ranging from wheat and barley to rapeseed and sunflower oil. Russia is also dominant in the fertilizer market.
Apart from the restoration of SWIFT access, Russia is also seeking the resumption of supplies of farm machinery and parts as well as the removal of curbs on insurance and reinsurance.
Asked to comment on the FT report, Peskov said: "So far we have nothing to report on the implementation of that part of the agreement that concerned the Russian side.
"For the time being, we state that this part of the agreements is still not fulfilled. There is still time for the deadline to expire, but there is not much hope."
Separately, Russia's envoy to the U.N. in Geneva said there were no grounds to maintain the "status quo" of the grain accord, the Russian news outlet Izvestia reported on Monday.
In a wide-ranging interview, envoy Gennady Gatilov told the outlet that implementing Russia's conditions for the extension of the agreement was "stalling."
"Russia has repeatedly extended the deal in the hope of positive changes," Gatilov told Izvestia. "However, what we see now does not give us grounds to agree to maintain the status quo."
New 'New Start' treaty
Gatilov, meanwhile, also said he hopes "common sense" will prevail in the United States and there will not be the need to consider the option to denounce the New Start nuclear weapons threat, the last remaining U.S.-Russia arms control treaty that caps the countries' strategic nuclear arsenals.
President Vladimir Putin has suspended Russia's participation in the pact, although both sides have pledged to continue to respect its limits and there since has been "direct contact" between Moscow and Washington on the issue.
Gatilov reiterated Moscow's position that Russia would only return to a nuclear reduction treaty if Washington abandons its "destructive course of inflicting a strategic defeat" on Russia but added Russia could be open to talks on a new pact.
"I wish we could instead start discussing a treaty that could replace START after February 2026," he said.
The New Start Treaty, signed in 2010, is due to expire in 2026.
Separately, Gatilov told Izvestia Russia is open to a diplomatic solution to the Ukrainian crisis, but the outlook is dim now as Kyiv and the West continue to bet on the use of military force.