Uncertainty in insurance poses challenges to Ukraine’s grain cooperation

Insurance concerns are the main factor holding back cruise ships leaving Ukraine’s Black Sea ports this week, traders say.

Questions remain as to whether insurance companies will be willing to insure ships while sailing in so-called mine waters, while consumers are hesitant to make new rules because of the Russian risk.

Russian missiles hit the main port of Odesa on Saturday, just 12 hours after the Russian Defense Minister, Sergei Shoigu, signed an agreement in Istanbul confirming Ukraine’s independence. Russia later said it had spotted a Ukrainian ship at a Western arms port, but did not provide evidence.

Ukraine’s construction minister, Oleksandr Kubrakov, said on Monday that the first ships would leave their Black Sea ports this week, despite the incident. Kubrakov, who signed on behalf of Kyiv, said that although Ukraine did not trust Russia, “it trusts its allies and partners, that’s why the agreement … was signed by the UN and Turkey and not Russia”.

A spokesman for the ministry said that it is working to implement the plan from Friday or early next week.

Map of the Black Sea and surrounding countries.

But markets are questionable. They are waiting to see what happens before introducing new rules, said Masha Belikova, an agricultural expert at the price reporting agency Fastmarkets.

“[Exporters] they have become pessimistic and still have doubts about the agreement, “said Belikova. “The first, and most important, is [they] they cannot trust Russia, so any agreement with Russia does not seem like an agreement.”

The most important thing for sellers and buyers, said Belikova, is to move the crops that have filled the ships that have been in Ukrainian ports since the invasion. If everything goes well, said Belikova, they will start thinking about moving the stored goods to the ports.

“Perhaps, then, if everything goes well, they will think of a new business,” said Belikova, referring to the new rules. “Right now, they don’t think it’s possible.”

Ukraine is one of the largest exporters of wheat, corn and sunflower oil in the world. Russia’s invasion and its blockade of Ukraine’s ports have caused global food prices to soar, pushing other countries, such as Somalia, into starvation mode.

One of the biggest issues being asked by companies is who can insure such a dangerous trip.

“It is difficult to guarantee any safety for workers, goods, people working at the port,” said Belikova. “What if they think there’s a weapon – just shut the place down?”

There is talk that Turkish merchant ships could be used for export because all international ships would be dangerous, said Tim Worledge, also of Fastmarkets.

However, Turkish ships tend to be smaller, carrying only 10,000-15,000 tons, while the type of ships that used to operate from Ukraine tend to carry 40,000-70,000 tons of cargo, Worledge said.

For the past five months, Ukraine has been using the shallow water ports on the banks of the Danube, on the border between Ukraine and Romania, and the Ukrainian Railways has been trying to increase rail freight to Europe.

Ukraine now exports about 2m tons of grain and food per month through these channels, Belikova said. Before the war, the figure was between 6m and 8m tonnes per month.

Russia’s attacks and negotiating tactics, including its attack last Saturday, have made consumers think about changing their products in different ways, Worledge said.

The Ministry of Construction of Ukraine said that exports will start from the port of Chornomorsk, the closest port to the Romanian border with Ukraine. Belikova said that, according to the information sent, there were at least 10 ships anchored in the port since February 24, which exceed 600,000 tons.