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Agriculture

The China – Russia “Grain Entente” – what is at stake for Canada and its allies?

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From the Macdonald Laurier Institute

By Serghey Sukhankin

Moscow – with China’s help, approval, and likely, guidance – intends to challenge the West by changing the rules of trade in foods critical to global buyers.

Throughout its entire history the Soviet Union faced one existential peril that was never solved until its collapse in 1991 – the prospect of food shortage and mass starvation. Its cumbersome, utterly ineffective, and artificially subsidized agricultural sector was a living testament to the erroneous nature of a planned command-administrative economic model.

The situation with food and staples became so dire that starting from 1963 the Soviet Bloc (the USSR, Hungary, Bulgaria, and Czechoslovakia) started importing wheat from the United States, Canada, and Australia. This practice continued until the demise of the Soviet Empire. Everything changed after the collapse of the USSR and introduction of market-oriented reforms in Russia in the 1990s, along with the growth of commodity prices and Russia’s inclusion in the global economic architecture.

By 2000, Russia had already doubled the amount of grain it produced, making it one of the world’s top producers of this strategic commodity. By the late 2010s to early 2020s, Russia emerged as a one of the world’s largest exporters of grain and agricultural products.

However, Russia quickly realized that commodities – especially food along with hydrocarbons – could become a very useful tool of coercion in geopolitical confrontations with its rivals. This became abundantly clear after the outbreak of Russia’s full-scale war of aggression against Ukraine in 2022, when both Russia’s top-tier politicians (such as Deputy Chairman of the Security Council and former President Dmitry Medvedev) and chief propagandists (such as Margarita Simonyan, the editor-in-chief of the Russian state-controlled broadcaster RT) claimed “hunger” to be Russia’s natural ally, and threaten to cut supplies of food staples to “unfriendly countries.”

At the same time, Russia tried to spark a confrontation between Ukraine and Poland, Hungary, Slovakia over commodities and staples supplies. Ironically, rather than hurting the West, Russia’s actions had a worse impact on so-called “friendly countries” – especially those in the Global South, where access to inexpensive and available foodstuffs is a matter of life and death.

Russia’s strategy of intimidation was also ineffective due to its invasion of Ukraine in February 2022. Its so-called “special military operation” was supposed to be quick and decisive. Two years later, the war has imposed massive pressure on the Russian budget, requiring a constant cash flow that mainly comes from exporting raw materials and commodities.

Forced to evolve its strategy, Russia seems to be abandoning its plan of threatening to starve its adversaries. Instead, Moscow – with China’s help, approval, and likely, guidance – intends to challenge the West by changing the rules of trade in foods critical to global buyers. This strategy is being implemented via pursuit of two interrelated initiatives: formation of a “Grain Entente” between Beijing and Moscow, and the use of the BRICS trading bloc (consisting of nine nations led by founding countries Brazil, Russia, India, China, and South Africa) as a critical vehicle of change.

The first major step in this direction was made in October 2023, when the Russian Food Export Trade LLC company and China Chengtong International Limited concluded the “grain deal of the century” – the largest contract of this type ever signed between the two countries – according to which the Russian side pledges to deliver 70 million tons of various types of grain (produced in the Urals, Siberia, and the Far East) over the next twelve years for US$26.5 billion. As a result, already in the first quarter of 2024, Russia broke a historical record by supplying China with large volumes of oats (.7 times more than the previous year) and buckwheat (3.3 more than the previous year) receiving a staggering US$127 million. Yet, mounting grain sales is only the tip of the iceberg. The most critical development is China’s gradual overtaking of Russia’s logistical infrastructure, which could pave the way for China’s growing control over Eurasian logistics and trade routes.

In September 2023, officials from Russia and China met at the 8th Eastern Economic Summit in Vladivostok, where officials from Russia and China agreed to create a logistical hub – the “Grain Terminal Nizhneleninskoye–Tongjiang” in the Jewish Autonomous Oblast. The goal is to create the Russia’s first “land-based grain fleet.” Consisting of 22,000 containers transporting grain, it will be capable of moving up to 600,000 tons of grain with a maximum storage capacity of up to 8 million per year. The strategic significance of this move is clear. On one hand, it allows Russia to “safeguard” itself against sanctions pressure, which will likely make Russia’s behaviour in Europe (and elsewhere) even more aggressive and unpredictable. On the other hand, China – which will acquire de facto control over Russia’s grain – will see Beijing become the world’s largest grain hub, giving it enormous power to influence and set global food prices.

Russia’s next major move was to push for the creation of a BRICS grain exchange. Fully supported by Russian President Vladimir Putin, the proposed grain exchange would bring together some of the world’s biggest grain buyers and exporters, cumulatively accounting for more than 42 per cent of global grain production (at nearly 1.2 million ) and 40 per cent of global consumption. International observers and subject experts have already warned that Russia- and China- adverse exporters of grain and agricultural products such as the United States, Canada, and Australia “might face challenges in maintaining their market share and negotiating for favourable trade terms, while facing competition from cheaper Russian .” In effect, this may have “significant implications for global agricultural dynamics, ranging from geopolitical and geoeconomic realignments to increased competition in agricultural trade. For traditional exporters such as Australia and the US, it is a call to reassess their national policies and strategies to navigate the evolving landscape of international trade to maintain competitiveness.”

The emergence of the BRICS grain exchange – which will undoubtedly increase Russia’s (and most likely China’s) geoeconomic role – is only a part of a much bigger strategic challenge. If the BRICS grain exchange is successful, it will have a spillover effect on another critical product – the fertilizers required by both developed and developing nations. Russia already has a competitive advantage in fertilizer production, and post-2022, has tried to use its fertilizers as geopolitical tools pressuring international organizations (such as the United Nations) to lobby for the end of sanctions imposed on Russia after its full-scale invasion of Ukraine.

– If the Russia-China grain alliance proliferates and BRICS becomes a major player in the global flow of grains and other foodstuffs, it could prompt even greater changes to the established world market. Analysis of Russian-language sources and publications indicates that the next step would be the creation of an alternative to the “West-dominated” financial architecture, and ultimately, the transformation of global trade.

Russia’s plans (undoubtedly supported by China) pose a very serious challenge to Canada, its allies, and other liberal democracies.

They will likely suffer economic losses of grain exports due to the cheapness of Russian grain, and that country’s current occupation of a large part of Ukraine’s most fertile black-earth areas. If unchecked, Russia could assume control of more than 30 percent of global grain supplies.

Currently, the Indo-Pacific region is Canada’s largest export destination, with agriculture and food exports totaling $9.4 billion in 2022. If China gains unfettered access to Russian grain, it could seriously undercut Canada’s trade.

Making matters worse for Canada, its relationship with New Delhi is arguably at an all-time low, making it challenging to pivot sales of its agricultural products toward India or other countries without significant economic losses.

Looking at the bigger picture, there are a host of other potential threats to the global foods market, from the ongoing war in Ukraine to droughts and adverse climate conditions in the US, Argentina, and Australia. Amid growing uncertainty and upheaval, it’s possible that the global foods market will be carved up and dominated by Russia and other undemocratic, aggressive nations. Given Russia’s strategic goal of weakening the European Union, and ultimately causing its disintegration, it will continue to use artificially created food shortages in Africa and the Greater Middle East as a geopolitical weapon against the EU. The Kremlin hopes to replicate the crisis that occurred in 2015, when hundreds of thousands (now, potentially millions) of illegal migrants and asylum seekers poured into the EU – wreaking havoc, fostering intra-EU conflict, and assisting the rise of far-right (and left) populists.

The first step in Russia’s grand strategy is the de facto establishment of the Russo-Chinese “Grain Entente.” The next move will be the creation of a BRICS grain exchange and inclusion of other strategic commodities under the umbrella of BRICS operations. This is clearly a wakeup call for the West. We need to heed it, or else risk more dire, far-reaching consequences.


Dr. Sergey Sukhankin is a Senior Fellow at the Jamestown Foundation (Washington, DC) and a Fellow at the North American and Arctic Defence and Security Network (NAADSN). His project discussing the activities of Russian PMCs, “War by Other Means,” informed the United Nations General Assembly report entitled “Use of Mercenaries as a Means of Violating Human Rights and Impeding the Exercise of the Right of Peoples to Self-Determination.”

This article was published with support from Konrad-Adenauer-Stiftung Canada.

 

Agriculture

Restoring balance between renewable energy, agricultural land and Alberta’s iconic viewscapes

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Alberta is known around the world for many things – some of the most breathtaking and iconic scenery on earth, a world-class agricultural industry that puts high-quality food on tables across the globe and a rich history of responsible energy development. Alberta is a destination of choice for millions of visitors, newcomers and investors each year.

To ensure Alberta’s continued prosperity, it is imperative that future energy development is balanced with environmental stewardship, protecting Albertans’ ability to use and enjoy their property, and safeguarding agriculture for continued food security.

Alberta’s renewable energy sector has grown rapidly over the past decade, yet the rules to ensure responsible development have not kept up. As a result, municipalities, agricultural producers and landowners across the province raised concerns. Alberta’s government is fulfilling its duty to put Albertans first and restore the balance needed for long-term success by setting a clear path forward for responsible renewable energy development.

“We are doing the hard work necessary to ensure future generations can continue to enjoy the same Alberta that we know and love. By conserving our environment, agricultural lands and beautiful viewscapes, our government is protecting and balancing Alberta’s long-term economic prosperity. Our government will not apologize for putting Albertans ahead of corporate interests.”

Nathan Neudorf, Minister of Affordability and Utilities

Amendments to the Activities Designation Regulation and Conservation and Reclamation Regulation provide clarity for renewable energy developers on new and existing environmental protections.

These changes will create consistent reclamation requirements across all forms of renewable energy operations, including a mandatory reclamation security requirement. Albertans expect renewable power generation projects to be responsibly decommissioned and reclaimed for future generations. Alberta’s government stands firm in its commitment to protect landowners and taxpayers from being burdened with reclamation costs.

“We want to protect landowners, municipalities and taxpayers from unfairly having to cover the costs of renewable energy reclamations in the future. These changes will help make sure that all renewable energy projects provide reasonable security up front and that land will be reclaimed for future generations.”

Rebecca Schulz, Minister of Environment and Protected Areas

Alberta’s government committed to an ‘agriculture first’ approach for future development, safeguarding the province’s native grasslands, irrigable and productive lands. The protection of agricultural land is not only essential to food production, but to environmental stewardship and local wildlife protection.

The Electric Energy Land Use and Visual Assessment Regulation follows this ‘agriculture first’ approach and enhances protections for municipalities’ most productive lands, establishing the need to consider potential irrigability and whether projects can co-exist with agricultural operations. These changes are critical to minimizing the impacts of energy development on agricultural lands, protecting local ecosystems and global food security. With these new rules, Alberta’s farmers and ranchers can continue to produce the high-quality products that they are renowned for.

“Our province accounts for nearly 50 per cent of Canada’s cattle, produces the most potatoes in the country, and is the sugar beet capital of Canada. None of this would be possible without the valuable, productive farmland that these new rules protect. Understanding the need for an ‘agriculture first’ approach for energy development is as simple as no farms, no food.”

RJ Sigurdson, Minister of Agriculture and Irrigation

The new Electric Energy Land Use and Visual Assessment Regulation also establishes specific guidelines to prevent projects from impacting pristine viewscapes. By establishing buffer zones and visual impact assessment zones, Alberta’s government is ensuring that industrial power projects the size of the Calgary Tower cannot be built in front of UNESCO World Heritage sites and other specified viewscapes, which will support the continued growth and success of Alberta’s tourism sector.

As Alberta’s population and economy grows, it is critical that the province has the additional power generation needed to meet increasing demand. Power generation must be developed in a balanced and responsible manner that promotes environmental stewardship, ensures the continued enjoyment of Alberta’s beautiful landscapes, and safeguards food security by protecting Alberta’s valuable agricultural lands. By encouraging the responsible development of additional power generation with these new regulations, Alberta’s government is listening to Albertans and ensuring the electricity grid is affordable, reliable and sustainable for generations to come.

Summary of Policy Changes

Following the policy direction established on February 28, 2024, Alberta’s government is now implementing the following policy and regulatory changes for renewable power development:

Agricultural lands

The new Electric Energy Land Use and Visual Assessment Regulation takes an “agriculture first” approach.
• Renewable energy developments will no longer be permitted on Land Suitability Rating System (LSRS) Class 1 and 2 lands unless the proponent can demonstrate the ability for both crops and/or livestock to coexist with the renewable generation project,

• In municipalities without Class 1 or 2 lands, Class 3 lands will be treated as Class 1 and 2.

• An irrigability assessment must be conducted by proponents and considered by the AUC.

Reclamation security

Amendments to the Activities Designation Regulation and Conservation and Reclamation Regulation create consistent reclamation requirements across all forms of renewable energy operations, including a mandatory reclamation security requirement. There will be a mandatory security requirement for projects located on private lands.

• Developers will be responsible for reclamation costs via a mandatory security or bond.

• The reclamation security will either be provided directly to the province or may be negotiated with landowners if sufficient evidence is provided to the AUC.

Viewscapes

The Electric Energy Land Use and Visual Assessment Regulation ensures pristine viewscapes are conserved through the establishment of buffer zones and visual impact assessment zones as designated by the province.

• New wind projects will no longer be permitted within specified buffer zones.

o Other proposed electricity developments located within the buffer zones will be required to submit a
visual impact assessment before approval.

• All proposed electricity developments located within visual impact assessment zones will be required to submit a visual impact assessment before approval.

Municipalities

The AUC is implementing rule changes to:

• Automatically grant municipalities the right to participate in AUC hearings.

• Enable municipalities to be eligible to request cost recovery for participation and review.

• Allow municipalities to review rules related to municipal submission requirements while clarifying consultation requirements.

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Agriculture

Saskatchewan potash vital for world food

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From Resource Works

Fertilizer Canada says the fertilizer industry contributes $23 billion a year to Canada’s economy and provides over 76,000 jobs.

A small potash extraction company in Manitoba calls Saskatchewan “the Niagara Falls of potash in Canada.”

The current 10 mines in Saskatchewan produced around 13 million tonnes in 2023, accounting for some 33% of global potash production, and exported 95% of it to more than 75 countries.

Potash mine No. 11 in Saskatchewan is working toward production in late 2026. That’s the $14-billion Jansen mine, owned by BHP, located 140 kilometres east of Saskatoon. It aims to produce around 8.5 million tonnes a year to start, and as much as 16–17 million tonnes a year in future stages.

With potash used primarily in agricultural fertilizers, Saskatchewan’s output is a key ingredient in global food security. Fertilizer is responsible for half of the world’s current food production.

As Real Agriculture points out: “Fertilizer production is not only an economic driver in Canada, but it is also a critical resource for customers around the world, especially in the United States.”

This is particularly important as Russia’s war on Ukraine has raised doubts about reliable supplies of potash from Russia, the world’s No. 2 producer, which produced 6.5 million tonnes in 2023.

In fertilizers, the potassium from potash increases plant growth and crop yields, strengthens roots, improves plants’ water efficiency, and increases pest and disease resistance. It improves the colour, texture, and taste of food. Natural Resources Canada adds: “Potassium is an essential element of the human diet, required for the growth and maintenance of tissues, muscles and organs, as well as the electrical activity of the heart.”

Canada’s federal government has included potash as one of 34 minerals and metals on its list of critical minerals.

Fertilizer Canada says the fertilizer industry contributes $23 billion a year to Canada’s economy and provides over 76,000 jobs.

The potash operations in Saskatchewan are in the Prairie Evaporite Deposit, the world’s largest known potash deposit, formed some 400 million years ago as an ancient inland sea evaporated. The deposits extend from central to south-central Saskatchewan into Manitoba and northern North Dakota. These deposits form the world’s largest potash reserves, at 1.1 billion tonnes.

Manitoba’s first potash mine is close to bringing its product to market. The PADCOM mine is 16 kilometres west of Russell, Manitoba, near the Manitoba-Saskatchewan border. The Gambler First Nation has acquired a one-fifth stake in the project.

PADCOM injects a heated mixture of water and salt underground to dissolve the potash, which is then pumped to the surface and crystallized. CEO Brian Clifford says this process is friendlier to the environment than the conventional method of mining underground and extracting ore from rock deposits.

Saskatchewan’s northern potash deposits are about 1,000 metres below the surface and are extracted using conventional mining techniques. To the south, deposits are anywhere from 1,500 to 2,400 metres deep and are mined using solution techniques.

PADCOM aims to produce 100,000 tonnes of potash per year, eventually growing to 250,000 tonnes per year. However, PADCOM president Daymon Guillas notes that across the Manitoba-Saskatchewan border, the Nutrien potash mine near Rocanville, Saskatchewan, produces five to seven million tonnes per year.

“In 36 hours, they produce more than we do in a year. Saskatchewan is the Niagara Falls of potash in Canada. Our little project is a drip, just a small drip out of the faucet.”

(New Brunswick once had a small potash mine, but it closed in 2016.)

Real Agriculture says: “Canadian-produced potash remains vital to the U.S.’s ability to produce enough corn for feed, ethanol production, and export requirements, at a time when the U.S. heightens its focus on reducing exposure to international integrated supply chains in favour of U.S. domestic supply chains.”

Writer Shaun Haney continues: “For the U.S. corn farmer, Canadian-produced potash is critical for achieving the top yields. According to StoneX, over the past three years, Canada accounts for roughly 87 per cent of potash imports by the U.S., while Russia sits at 9.5%.”

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