Shipping companies are not rushing to export millions of tons of grain from Ukraine, despite a breakthrough agreement to create safe corridors through the Black Sea. That’s because explosive mines are floating in the waters, shipowners are assessing the risks and many still have questions about how the deal will go.
The complexity of the deal has caused a slow, tentative start, but it’s only good for 120 days – and the clock started ticking last week.
The goal for the next four months is to get some 20 million tons of grain from three Ukrainian seaports that have been blocked since the Russian invasion of February 24. That gives about four to five large bulk carriers a day to transport grain from ports to millions of impoverished people worldwide who are starving.
It also provides plenty of time for things to go wrong. Just hours after the signing Friday, Russian missiles hit the Ukrainian port of Odessa, one of the port included in the agreement.
Another key element of the deal provides assurances that shipping and insurers transporting Russian grain and fertilizers will not become entangled in the wider net of Western sanctions. But the deal brokered by Turkey and the UN runs counter to the reality of how difficult and risky the pact will be to implement.
“We have to work very hard now to understand in detail how this will work in practice,” said Guy Platten, secretary general of the International Chamber of Shipping, which represents the national associations of shipowners that represent approximately 80% of global merchant shipping. . fleet.
“Can we assure and guarantee the safety of the crews? What will also happen to the mines and the minefields? So a lot of uncertainty and unknowns at the moment,” he said.
Gathering wheat and other foodstuffs is critical for farmers in Ukraine, who are running out of storage capacity due to a new crop. Those grains are vital to millions of people in Africa, parts of the Middle East and South Asia, who are already dealing with food shortages and in some cases famine.
Ukraine and Russia are major global suppliers of wheat, barley, maize and sunflower oil, with fighting in the Black Sea region known as the “granary of the world”, raising food prices and promoting political stability in developing and leading countries in part. of food exports, exacerbating the crisis.
The deal stipulates that Russia and Ukraine will provide “maximum guarantees” to ships braving the Black Sea voyage to the Ukrainian ports of Odessa, Chernomorsk and Yuzhny.
“Obviously, the main risk we face is mines,” said Munro Anderson, intelligence chief and one of Dryad’s founders. The maritime security consultancy is working with insurers and brokers to assess the risks that ships along the route may face as naval mines laid by Ukraine to deter Russia.
Turkey’s defense minister said on Wednesday that demining the waters was not necessary immediately, but plans could be made if it was made mandatory later.
Ukrainian officials have expressed hope that exports from one port could resume within days, but they have also said it could take two weeks for all three to be operational again. Experts in Ukraine are working to determine safe routes for ships.
Shipowners, charterers and insurance companies, meanwhile, are trying to understand in real time how the deal will turn out.
“I think it’s going to be about the position of the maritime insurers that offer war risks and how much they’re going to add to extra costs for ships to enter that area,” said Michelle Wiese Bockmann, a shipping and commodities analyst at Lloyd’s List, a global publication on shipping news.
Bockmann said ships carrying this type of cargo typically carry between 20 and 25 seafarers.
“You can’t risk those lives without something concrete and acceptable for the shipowners and their charterers to carry grain,” she said.
Oleksiy Melnyk, an analyst at the think tank Razumkov Center in Kiev, said security concerns remain largely unsolved as Russian missiles could hit warehouses storing grain and ports.
“Shipowners and insurance companies are afraid, they have not received reliable safety guarantees,” Melnyk said.
“We see only words and promises, which are worth little in times of war,” he added.
Marine insurers reached by AP declined to comment on whether they would provide coverage for these ships.
The war has wreaked havoc on world trade, with more than 100 ships stranded in Ukraine’s many ports.
In the three ports in the export agreement, 13 bulk carriers and freighters have run aground in Chornomorsk, six in Odessa and three in Yuzhny, data from Lloyd’s List Intelligence shows.
Some of those ships may still have crews on board who can be mobilized to start exporting grains.
Ukrainian traders have been able to send some grain down the Danube, helping to boost exports to about 1.5 million tons in May and up to 2 million tons in June, although that’s still less than half of monthly grain shipments from 4 to 5 million tons before the war, according to Svetlana Malysh, an analyst of Black Sea agricultural markets at Refinitiv.
According to Refinitiv’s trade flows, Russia exported about 30 million tons of wheat in the 2021-2022 marketing year. That is the lowest level since 2017, partly due to the chilling effect of sanctions. Russian fertilizer exports also fell 25% in the first quarter of the year compared to the same period last year, Malysh said.
For ships going to Ukraine’s three ports, smaller Ukrainian pilot boats will guide the ships through approved corridors. The entire operation, including the planning of ships along the route, will be overseen by a joint coordination center in Istanbul, staffed by officials from Ukraine, Russia, Turkey and the United Nations.
Once ships reach port, they will be loaded with tens of thousands of tons of grains before returning to the Bosphorus, where representatives from Ukraine, Russia, the UN and Turkey will board to inspect them for weapons. There will probably also be inspections for ships going to Ukraine.
Because the process is so complex and slow, it is unlikely to have a significant impact on the global grain price.
“The balance of power in this agreement is still with Russia,” said Anderson, Dryad’s chief of intelligence. All Ukrainian ports outside the agreement are at increased risk of attack, he said.
“I think Russia wants it to be seen as the state controlling the story in the Black Sea,” Anderson said.
AP