Cargo companies left with a challenging task

Cargo companies have been left with a challenging task to find an alternative route, especially for grain, as the risk of bombing has made it virtually impossible to insure ships departing from Ukraine via the Black Sea.

Cargo insurance can in theory be always considered “on a case-by-case” basis, Mathieu Berrurier, chief executive at insurance broker Eyssautier-Verlingue, told Agence France-Presse (AFP).

But with premiums having spiraled five to 10 times the amounts charged before Russia’s invasion of Ukraine in February 2022, companies are no longer paying.

Exiting Ukraine via the Black Sea had been stable for almost a year after Moscow signed an agreement enabling the invaded country to export its agricultural produce.

That allowed Ukraine to export 33 million tons of grain and helped push down global food prices.

Stepping up attacks

But Russia decided to pull out of the U.N.-Türkiye mediated grain deal and, in turn, has attacked Ukraine’s shipping infrastructure.

Kyiv is meanwhile using drones to target the Kerch Strait, which connects the Black Sea to the Sea of Azov, through which sizeable Russian exports pass.

“Risks have increased considerably” for cargo, said Berrurier. “Before, the risks were concentrated on warships.”

The majority of previously shipped Ukrainian grain exports now travel via the Danube River and by rail.

Ports along this alternative route are also under attack from Russians, according to Frederic Denefle, head of Garex, a French company specializing in marine risk insurance.

A Russian warship last month fired warning shots at a cargo vessel heading toward the Ukrainian port city of Izmail, down the Black Sea coast from Odesa.

“Maritime traffic has almost completely stopped” in the targeted areas, said Denefle, adding that the scattering of ships that depart the Odesa area have no cereals on board.

The container ship Joseph Schulte managed to reach Türkiye in mid-August.

In doing so, it became the first cargo ship to do so from Ukraine since the end of Moscow’s agreement, but it carried nonagricultural products.

Ukraine has sent four ships along a new sea route, while Russia is preparing a plan to send foodstuffs for free to some African countries and to send discounted grain for processing in Türkiye.

Public-private partnership

International insurers, including the brokerage firm Marsh, are in talks seeking to provide cover for vessels transiting Black Sea ports under a public-private partnership with Ukraine.

The discussions aim to “reduce insurance costs to a more reasonable level,” said Marcus Baker, global head of Marine and cargo at Marsh.

The goal is to establish a letter of credit recognizing that Ukraine and some of its lenders will be a party to an agreement, which should be finalized in “a couple of weeks,” according to Baker.

The proposed mechanism will initially insure against physical damage to ships before examining cover for the shipments themselves.

President Recep Tayyip Erdoğan said after talks Monday with Russian counterpart Vladimir Putin that Ankara was against alternative proposals to last year’s Ukraine grain agreement, which Moscow scuppered in July.

Erdoğan said Türkiye and the U.N. had prepared new proposals to address Russia’s problems with the deal, adding that he hoped to reach a workable solution “soon.”

“We have prepared a new proposal package in consultation with the U.N. I believe that it is possible to get results,” he said.

“I believe that a solution that will meet Türkiye’s expectations will be reached soon.”