Ukraine’s request to maintain grain transportation contradicts the reality of shippers Ship’s crew

(Bloomberg) –

Ukraine is urging grain exports to continue from key ports after Russia pulled out of the Black Sea Grains Agreement. Insurers and freight forwarders are not so sure.

Russia’s cancellation of the pact this week means safe passage through the waterway is no longer guaranteed. Ukraine is calling on other nations to help facilitate shipments from three of its deep-sea ports covered by the deal.

The US said escorting ships is not an option and insurance broker Marsh on Tuesday suspended its program of grain exports from Ukraine, underscoring the challenges ahead.

“No sane owner would dock there uninsured,” said Vasilis Mouyis, co-managing director of Greece-based Doric Shipbrokers SA, which had previously sent ships through the shipping passage. Without the protection of the safe corridor, “Ukraine trade is dead.”

Ukraine’s Black Sea ports are a major artery for grain sales abroad – historically they accounted for the bulk of shipments – and the harvest season is now underway. The deal helped clear the backlog created by the start of the war, but closing the corridor could slow the launch of the next crop.

Russia’s withdrawal from the pact also comes as Ukraine presses ahead with its counter-offensive in the south of the country. Massive drone strikes were reported on Tuesday following the destruction of the main bridge linking Russia and Crimea. Moscow has warned that dangers remain with shipping as well.

“Attempts to proceed with the grain agreement without the participation of the Russian Federation should take into account the risks associated with the fact that the grain export route runs close to the combat zone,” Kremlin spokesman Dmitry Peskov said.

Appeal to Turkey

Ukraine has asked the United Nations and Turkey – which negotiated the deal almost a year ago – if they will continue to support it.

“Ukraine’s main task now is to gain Turkey’s support,” said Dmitry Skornyakov, CEO of HarvEast Holding. He suggested that military escorts from Turkey could be used for ships entering and leaving Ukrainian ports.

It would be an extremely risky move for Turkey, and the country is unlikely to interfere, according to an official familiar with the matter. Turkey would not endanger its naval vessels to support ships from Ukraine, instead focusing on resuming the deal with Russia’s involvement.

Ukraine can still transport its crops by land and river, but these routes are more expensive and eat into farmers’ incomes. Deliveries via the European Union also cause tensions with the neighbours.

The cost of exporting by sea is likely to rise, partly due to higher insurance and freight rates, said Roman Slaston, chairman of the Ukrainian Agribusiness Club. He remained optimistic that deliveries could take place but said it could take a few weeks to prepare.

When Russia briefly suspended its participation in the deal in October, it issued warnings to ships navigating the corridor. Some insurance coverage was suspended and at least one ship bound for Odessa turned back.

“I don’t think shipowners will call at Ukrainian ports until the corridors are restored – that’s not certain,” said Paul Markides, marine quality manager at Intercargo, a global trade association for dry bulk shipowners.

–With support from Megan Durisin, Lars Mucklejohn, Daryna Krasnolutska and Olesia Safronova.

© 2023 Bloomberg LP

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