At the end of April this year, the Kremlin announced that it would stop exporting grains such as wheat and corn, as well as legumes soybeans and cooking oil, at the end of June. In order to stop the rapid economic deterioration caused by the spread of covid-19, Russia's real aim was to "Use Grain Diplomatic". (Image quoted from Reuters)

 At the time of the grain embargo, a European think tank researcher said, "We are trying to use grain politically in anticipation of a nationwide vote on whether or not to amend the Constitution, such as president Putin's approval rating at a record low."

 European countries importing wheat and other goods from Russia were concerned about the significant impact of the grain embargo on food security. At the time of the announcement, Saudi Arabia and others were removed from export restrictions, and the researcher said, "The Kremlin's intentions can be understood by selecting countries that are embargoed."

 In mid-May, it was found that the agreement between the governments of Russia and Poland in the 1990s involved transit routes for natural gas shipments would not be renewed under European Union (EU) rules.

 Since the arrangement expires at the end of May, it has also emerged that Russia has announced a grain embargo announced against it in an effort to put pressure on the European side.

 It was said that there was a desire to stop the Europeans from breaking away from dependence on Russia, including energy such as natural gas, by threatening food security.

 By the way, the movement of political use of grain was seen from the former Soviet Union age. Looking back on history, grains such as wheat attracted attention as diplomatic weapons in 1972, when the Soviet Union introduced the "Grain Thieves" scandal.

 The incident was an event in which the Soviet government secretly bought up large quantities of U.S. wheat. As a result, the American people fell into the trap of being made to buy high food products because the grain market soared, and it became a chance to make the existence of the grain major such as Cargill which partitioned the business talk with the Soviet Union known to the world. The 1970s are said to be the era when grain became a weapon.

 At the end of 1979, soviet forces invaded Afghanistan, which brought about a major increase in tensions between the United States and the Soviet Union. 1979 was also the second year of the oil shock, and at the time there was widespread concern about inflation globally, with crude oil pricing in the $30 per barrel range. On the other hand, U.S. soybean production was a good harvest (2,260,665,000 bushels) for the third consecutive year, a record high at that time.

 As soon as news of the Invasion of Afghanistan was reported, the Carter administration promptly imposed economic sanctions against the Soviet Union on January 4, 1980. The U.S. government called for a grain embargo on other producers, and Australia, Canada, and others responded, but Brazil and Argentina counter-protested and increased grain exports to the Soviet Union, so the Soviet Union could barely avoid a food crisis.

 The U.S. grain embargo caused soybean, wheat and corn prices to plummet in the Chicago market at the end of the year. Soybean prices continued to fall sharply, falling to the $5 a bushel in April 1980, the first drop in three years to the $6 level. Despite the good harvest, producers are willing to impose a grain embargo. The U.S. government has been ashamed of it in the international community, and criticism of the Carter administration's mismanagement has increased, with farmers and others seeking compensation from farmers who have lost income due to falling grain prices in the country.

 Republican Ronald Reagan won the U.S. presidential election on November 4, 1980, and was the next President. On April 24, 1981, President Reagan was one of the first to lift the embargo against the Soviet Union during the Carter administration, and in October of the same year, he extended the U.S.-Soviet Long-Term Grain Agreement for a year.

 During this time, President Reagan took advantage of the failure of the grain embargo implemented by the Carter administration and successfully led the negotiations. At that time, the Soviet Union was driven into the situation where it was possible to sell the resource such as crude oil for the foreign currency acquisition because the capital situation deteriorated by the rise of the grain procurement expense, etc and the west side debt continued to increase.

 On the other hand, it was thought that the Reagan administration made the foreign currency acquisition of the Soviet Union contain by thoroughly implementing the high interest rate policy, took the tactic of abandoning the grain procurement by the capital obtained by the rise of the gold price, and this was successful. Grain played an important role in diplomatic bargaining during the U.S.-Soviet Cold War.

 It is well known that in recent U.S.-China trade negotiations, U.S. soybeans and liquefied natural gas (LNG) have been listed as key items of the Trump administration, which is calling on China to increase imports.

 In January of this year, the U.S. and China promised to buy large quantities of U.S. soybeans in a "first-stage agreement." However, data released by the Chinese authorities at the end of July found that China significantly increased its purchases of Brazilian soybeans in June (up 91% from the same month last year to 10.51 million tons). On the other hand, imports of U.S. soybeans in June fell 56.5 percent from a year earlier to only about 267,000 tons, becoming a new source of grain wars.

 The grain embargo is commonly invoked to switch exports to domestically due to delays in distribution and supply losses due to bad harvests of crops due to bad weather, severe natural disasters, and the spread of covid-19.

 From the perspective of "food security," it should not be overlooked that it will be used as a means of embargo due to diplomatic bargaining and artificial speculation by political leadership.

 

Naoya Abe

Former Bloomberg News reporter and editor

Capitol Intelligence Group (Washington D.C.) Tokyo bureau chief

Currently working as Managing editor of the news site MIRUPLUS