MAGGIE PAGANO: Turkey brokers grain deal between Russia and Ukraine

Turkey’s Recep Tayyip Erdogan is turning out to be quite the power-broker. After two months of negotiations, the Turkish president, with the United Nations, has finally managed to persuade Russia to allow Ukraine to start exporting grain through its Black Sea ports. 

It’s an important victory for Erdogan and the UN as it means that some of the world’s most vulnerable countries in Africa and the Middle East should soon be receiving grain supplies, hopefully alleviating an international food crisis which many feared may have led to millions of deaths. 

Russia will allow Ukrainian ships to guide grain cargoes in and out through the mined port waters, and has agreed a truce while these shipments take place. As mediator in chief, Turkey – backed by the UN – will be responsible for inspecting the ships in case they are smuggling weapons into Ukraine. 

These are huge quantities –about 20m tons of grain are stuck in silos in Odesa, the biggest Ukraine ports. Dozens of ships carrying cargo have also been trapped in the Black Sea because of Russia’s blockade.

It’s also a win-win for Russia, which together with Ukraine is one of the world’s biggest food exporters, as the agreement allows it to export its grain and fertiliser shipments via Black Sea ports, and some sanctions are to be eased. 

The truce was signed yesterday in Istanbul by Erdogan, UN secretary general Antonio Guterres and Russian and Ukrainian delegations. If it lasts, it is the first significant breakthrough since the war began five months ago. Whether it proves durable is impossible to judge. 

But it is positive that some sort of security is returning to world food supplies and prices, which have rocketed since the invasion. So is the news that gas is running through the Nord Stream 1 pipeline after Gazprom opened the taps on Thursday. 

The pipeline is only operating at 40 per cent capacity amid fears that Putin will switch it off again if he decides to freeze Europe in the winter. Even so, these are optimistic signs, and couldn’t have come at a better moment. 

The awful figures for the eurozone yesterday showed that business activity collapsed for the first time since February last year, reigniting fears of a recession this year and throwing bigger interest rate rises into doubt. The S&P Global eurozone purchasing managers’ index for July couldn’t be clearer – output and new orders fell from 52 in June to 49.4, the lowest since lockdown.

In Germany, industries are cutting production to save energy for winter but also because of lower demand. Output is also being depressed by more natural disasters. 

The Rhine, one of the main arteries for transporting freight across the continent, is experiencing its lowest water levels at this time of year in a quarter of a century. 

This will also hit power plants which rely on the Rhine for their cooling systems, compounding a devastating energy crisis. 

We can but hope that the grain truce is the first step towards a more constructive peace between Russia and Ukraine. They should be supported.

Sicknote Britain 

On another bright note, UK firms report prices are easing up after a fall in global commodity and energy prices over the last month. In contrast to the eurozone, the latest purchasing managers’ index reached 52.8 in July, suggesting the UK has grown for 17 consecutive months. 

By far the biggest concern in the services industry is the shortage of labour, coupled with demands for higher pay. 

With record vacancies and low unemployment, finding enough workers is turning into a big problem. 

Lockdown led to an exodus from the workforce, mainly because so many saw it as a chance to take early retirement. 

More worrying is that more than 250,000 people of working age are classified with either short or long term sickness since 2019. That’s a horrendous number and needs fixing fast.

Project Fear 

Whatever you think of Liz Truss, her radical agenda to cut taxes is stirring up the most delicious hornet’s nest. 

On the one hand, a clutch of top economists are warning of Armageddon if she were to adopt Reaganomics. 

On the other, Gerard Lyons, Julian Jessop and Andrew Lilico argue supply-side reforms and tax cuts are just what Britain needs to get growth going again. 

Sounds a bit like Brexit all over again to me. At least this time we only have six more weeks of Project Fear.