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As the first shipment of Ukrainian grain since February reaches safe waters and completes inspections in Turkey, GTR examines whether Black Sea ports are reopening for business, and what that means for traders, banks and insurers. 

The voyage of the Razoni, a cargo ship carrying around 27,000 tonnes of corn to Lebanon, has been described as a “beacon of hope” by the UN. The shipment is the first under the Black Sea Grain Initiative, an agreement between Russia, Ukraine and Turkey to facilitate the safe passage of vital food exports despite ongoing conflict in the region. 

Ukraine’s Black Sea ports have been subject to a blockade by Russia since its invasion nearly six months ago, leaving traders unable to move millions of tonnes of wheat, corn and sunflower products out of the country. 

Following its departure from Odesa on Monday, the Razoni vessel exited Ukrainian waters on Tuesday and passed joint inspections in Istanbul on Wednesday. As of press time, another bulk vessel – Osprey S – is due to cross its path in the Aegean Sea en route to the port of Chornomorsk, 30km south of Odesa. 

“What we’ve witnessed today in Odesa is an important starting point,” said UN secretary-general Antonio Guterres upon the ship’s departure. “It must be the first of many commercial ships bringing relief and stability to global food markets.” 

The primary objective of the agreement is to address growing fears over food security and reduce pressure on high prices, Guterres said, but a reopening of trade flows would also be welcome news to commodity traders concerned about losses arising from the blockade. 

Trading giant Bunge said last month that it has incurred US$80mn of charges in the first six months of this year as a result of the conflict in Ukraine.  

Charges are “primarily related to losses associated with inventories physically located in occupied territories in Ukraine, or in difficult to access locations with high costs of recovery”, it said in its Q2 results. 

US-headquartered Cargill is reportedly holding large volumes of grain at Ukrainian ports, and World Food Programme records show the company was awarded a tender for the sale of wheat for US$10.2mn on July 29, the first such deal since the outbreak of war. Cargill did not respond when contacted. 

Viterra, a subsidiary of Glencore, also has operations in the region, with the company announcing in June that a vegetable oil terminal had been damaged following Russian strikes on the port city of ​​Mykolaiv. 

“There are quite a few traders and shippers hoping to move grain, sunflower oil and sunflower seeds from Ukrainian ports,” says Rupert Cutler, director and principal of specialist risk and insurance consultancy Holtarka, speaking to GTR. 

“Not only do they want to sell before it deteriorates, but they know there’s another harvest coming in and there may not be anywhere to store more grain, so there are commercial and practical reasons for wanting to ship those goods.” 

 

Banks and insurers 

The UN has emphasised that exports facilitated under the Black Sea Grain Initiative must be commercial transactions, likely requiring the involvement of trade finance and maritime insurance  providers. Despite the war-related risks of such activity, there are commercial motivations for doing so. 

“For banks, if they already have credit facilities with those traders moving commodities, they would prefer to be repaid through commercial trade – particularly if they don’t have insurance cover for sanctions or embargoes,” says Holtarka’s Cutler.  

“Also, it would be good from a reputational perspective to be seen to be assisting on a humanitarian basis.” 

But for that to happen, the vessel owner, the vessel operator and the cargo owner are faced with a contractual requirement to obtain insurance cover, Cutler says. He adds: “Without war risk insurance, the goods will not move.” 

For lenders, the development “will be significant only if it leads to normalised flows that can be accommodated as part of ‘business as usual’, with P&I Club and insurers’ buy-in, financed by normal trade lines”, says Sean Edwards, chair of the International Trade and Forfaiting Association (ITFA). 

“We are far from that stage at the moment, and the need to obtain approval of all the Joint Coordination Centre parties means a bureaucratic obstacle course which will limit any normalisation and export volumes,” he tells GTR. 

“Banks cannot decide to finance, even if they were moved to for humanitarian reasons, without reassurances that are not likely to be forthcoming.” 

Cutler is optimistic there is an appetite for underwriting such policies in the commercial insurance market, both for hull and cargo, particularly if there is background support from governments. 

“If they can evaluate the risk correctly, it could be lucrative,” he says. “But one of the biggest challenges for a marine insurer, whether it’s hull or cargo, is whether either of the warring parties are going to disclose a safe passage. That creates a risk of attacking that sensitive area, for instance with mines.” 

The first shipment “is very much a guinea pig”, he says. 

 

Stolen grain 

A complication associated with trading grain from Black Sea ports is the escalation of tensions around the alleged theft of Ukrainian grain. 

The volume of grain shipments from Sevastopol, in Russian-controlled Crimea, has surged since February, prompting speculation that Ukrainian goods are being looted and sold by Russia aggressors. 

Nearly 165,000 tonnes of grain was exported from Sevastopol in June this year, almost 10 times the figure for January, according to data provided to GTR by AgFlow, a Geneva-based technology firm specialising in agricultural commodity flows. 

Meanwhile, from January to March, exports from Chornomorsk and Yuzhny in Ukraine dropped from over 1 million tonnes per month each to 44,000 and 71,500 tonnes respectively. No data is available from April onwards, though the entire period has been covered by the Russian blockade. 

Maritime intelligence firm Windward has identified a spike in the number of Russian bulk carriers switching off location transmission signals – a technique known as “going dark”, widely used in sanctions evasion – during recent months. 

From March 1 to July 15 this year, Windward identified 170 events where vessels went dark in the Azov Sea before reappearing on their way out through the Bosphorus Strait, suggesting the possibility they were loading grain in Russian-controlled areas. The majority of those vessels went on to call at ports in Turkey and Bulgaria. 

In late July, Lebanese authorities seized a ship carrying wheat flour and barley from Russia, suspected to have been stolen from Ukraine. The Ukrainian embassy in Beirut said the goods originated in the south-east of the country and were loaded in Crimea. 

Earlier in the same month, authorities in Turkey launched an investigation into another ship sailing from Russia, also on the grounds its cargo may have been stolen.  

Russian government spokespeople have repeatedly denied looting Ukrainian grain, but the suggestions are potentially alarming for traders. 

Swiss federal prosecutor Stefan Blättler warned last month that “the commercialisation of looted raw materials could constitute a war crime”.  

Though “unprecedented”, Blättler said traders linked to Switzerland’s prominent commodities trading market could face legal action if they handle such goods. 

That is likely to undermine efforts by the US government to keep food exports flowing, with officials emphasising last month that despite extensive sanctions against Russia, exports of food and fertiliser are still permitted.