Shipping companies are not rushing to export millions of tons of trapped grain out of Ukraine, despite a groundbreaking deal to provide safe corridors through the Black Sea. This is because the explosive mines drift in the watersshipowners are assessing the risks and many still have doubts about how the deal will play out.
The complexities of the deal have made for a slow and cautious start, but it is only valid 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 out of three Ukrainian seaports blocked since the invasion Russian February 24. That provides time for four or five large bulk carriers a day to transport grain from ports to millions of impoverished people around the world facing hunger.
It also provides enough time for things to go wrong. Just a few hours after the signing on Friday, Russian missiles fell in the Ukrainian port of Odessa, one of those included in the agreement.
Another key element of the deal offers assurances that Russian shipping and insurers transporting grain and fertilizer will not be caught in the wider web of Western sanctions. But the agreement negotiated by Turkey and the UN collides with the reality of how difficult and risky it will be to carry out the pact.
“We have to work very hard now to understand the details of how this is going to work in practice.”said Guy Platten, secretary general of the International Chamber of Shipping, which says it represents national shipowners’ associations, which account for about 80% of the world’s merchant fleet.
“Can we make sure and guarantee the safety of the crews? What will also happen to mines and minefields? So there’s a lot of uncertainty and unknowns right now,” he said.
Getting wheat and other food out is critical for Ukraine’s farmerswho are running out of storage capacity as they harvest their fields. Those grains are vital to millions of people in Africa, parts of the Middle East and South Asia, already facing food shortages and, in some cases, famine.
Ukraine and Russia are key global suppliers of wheat, barley, corn and sunflower oil, and fighting in the Black Sea region, known as the “breadbasket of the world”, is driving up food prices and threatening political stability in the world. developing countries and leading countries to ban some food exports, worsening the crisis.
The agreement stipulates that Russia and Ukraine will provide “maximum guarantees” to ships that brave the journey across the Black Sea to the Ukrainian ports of Odessa, Chernomorsk and Yuzhny.
“Obviously the main risk you will face will be mines”said Munro Anderson, chief intelligence officer and founding partner of Dryad. The maritime security advisory company is working with insurers and brokers to assess the risks that ships could face along the route due to sea mines laid by Ukraine to deter Russia from drifting.
Shipowners, charterers and insurance companies seek to understand how the deal will play out in real time.
“I think it will come down to the position of marine insurers providing war risk and how much they will add in extra charges for ships to come into that area,” said Michelle Wiese Bockmann, shipping and commodity. Analyst for Lloyd’s List, a global shipping news publication.
Bockman said that ships that carry this type of cargo usually have between 20 and 25 seafarers on board.
“You can’t risk those lives without something concrete and acceptable to the shipowners and their charterers to move the grain”said.
Marine insurers contacted by The Associated Press declined to comment on whether they would provide coverage for these ships.
Ukrainian officials have expressed hope that exports could resume from one of the ports within days, but have also said it could take two weeks for all three ports to be operational again.
The war has wreaked havoc on world trade, stranding more than 100 ships in many Ukrainian ports.
Since the war began at the end of February, 22 bulk carriers and freighters have been stuck in the three ports included in the export agreementLloyd’s List Intelligence data shows. Around 13 are berthed in Chornomorsk, six in Odessa and three in Yuzhny.
Some of those ships could still have crews on board that could be mobilized to start exporting grain.
Ukrainian traders have been able to ship some grain across the Danube River, helping boost exports to around 1.5 million tons in May and up to about 2 million tons in June, though that’s still less than half of prewar monthly grain shipments of 4 to 5 million tons.according to Svetlana Malysh, an analyst for Black Sea agricultural markets at Refinitiv.
During the business year 2021-2022, Russia exported about 30 million tons of wheat, according to Refinitiv Trade Flows. That is the lowest level since 2017, in part due to the chilling effect of sanctions. Russian fertilizer exports also saw a 25% drop in the first quarter of the year compared to the same period last year, partly due to Western sanctions, Malysh said.
For ships heading to the three Ukrainian ports, the smaller Ukrainian pilot boats will guide the ships through the approved corridors. The entire operation, including the scheduling of ships along the route, will be overseen by a Joint Coordination Center in Istanbul made up of officials from Ukraine, Russia, Turkey and the United Nations.
Once the ships reach the port, they will be loaded with tens of thousands of tons of grain before heading back to the Bosphorus Strait, where representatives from Ukraine, Russia, the UN and Turkey will board the ships to inspect them for weapons. It is likely that there will also be inspections for ships embarking from Ukraine.
“The balance of power in this agreement is still in the hands of Russia”said Anderson, Dryad’s chief of intelligence. Any Ukrainian port outside the agreement faces a higher risk of attack, he said.
“I think what Russia wants … is to be seen as the state that controls the narrative within the Black Sea,” Anderson said.
(with information from AP)
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