According to Reuters, Russia is experiencing difficulties with grain exports due to Ukrainian sea drone attacks on Russian ships in the Black Sea.
Russian wheat transportation costs have already begun to soar. Recently, the cost of insuring ships destined for Russia’s Black Sea ports, through which 70% of Russian grain is sold, has skyrocketed.
Risks in the Black Sea also increase Russia’s freight prices and push it to work with less trustworthy maritime companies.
Russia’s scarcity of ships and Western grain traders’ declining desire to do business with Moscow are driving up the cost of transporting Russian wheat at the time of its war with Ukraine has spread dangerously close to crucial Black Sea supply channels.
Moscow terminated the Black Sea Grain deal that allowed Ukraine’s wheat cargo safe passage in the Black Sea, imposing a blockade on its neighbour. In addition, Russia bombarded storage facilities in Ukraine’s ports. Russian dictator Putin assured of replacing Ukrainian grain with Russian deliveries to Africa.
Ukraine’s response, which included sea drone assaults on a Russian oil tanker and a battleship at its Novorossiysk naval station, which is located next to a prominent grain and oil port, has contributed to the additional threats to Russian trade through the Black Sea.
Although agricultural exports are not subject to direct European and American sanctions imposed following Russia’s invasion of Ukraine, the Kremlin claims that limitations on banks and Russian individuals are “hidden sanctions” on its food trade.
The financial and security risks related to trading with Russia, aggravated by the termination of the Grain deal and the collapse of the Black Sea corridor, are driving up freight expenses for Moscow and pushing it toward older and smaller ships operated by less trustworthy shipping companies, according to Reuters. Agency’s reporting is based on exchanges with marine insurers, traders, and shipping enterprises.
The scenario is increasing concerns about Russia’s ability to maintain a high volume of exports. If not handled, it might push global wheat prices higher. International commodity firms are no longer assisting Russia with the mechanics of grain trading.
While Russian exports remain solid, Moscow has had to procure more of its own freight in recent months, increasingly depending on a “shadow fleet” of older vessels often managed by companies registered in Turkey and China, according to Reuters.
Without the Black Sea corridor, Russia and Ukraine warned in July that vessels bound for each other’s ports might be considered legitimate military targets, as the Russia-Ukraine war continues for an 18th month. It fuels Western corporations’ fear of risk for trade via the Black Sea.
Insurance for ships travelling to Russia’s Black Sea ports costs tens of thousands of dollars in daily premiums, with rates rising in response to Russia’s recent strikes on Ukraine’s shipping routes through the Danube and Ukraine’s drone attacks on Russian ships.
Other regions are more complicated and costly for Russian exports. Thus the Black Sea remains a vital area.
The Black Sea terminals in Russia handle over 70% of its grain exports. The Novorossiisk and Taman ports are among them.
Despite the tensions, worldwide wheat prices are still significantly below their highs from last year, when Russia’s invasion of Ukraine sparked worries about a global famine crisis. More Ukrainian grain removed from the international market might increase supply pressure.
The escalation of tensions in the Black Sea is expected to impact Russia’s export numbers by preventing shipping companies from sending boats to Russian ports, mainly newer ships that carry more cargo.