THE agreement reached today in Istanbul to resume the export of around 20 million tons of Ukrainian grain will allow three ports in the Odesa region to be unblocked, but suitable ships and crews will need to be found – and of course insured – which is estimated to be expensive.
What does the agreement provide?
Safe lanes will allow merchant ships to move in the Black Sea, and both sides (Russia and Ukraine) have pledged “not to attack”, according to a UN official.
The goal is to get 20-25 million tons of grain in silos at the ports out of Ukraine as the new harvest approaches.
In the coordination and control center of the operation, which will be based in Istanbul, there will be representatives of all four sides (Ukraine, Russia, Turkey, UN). This center will determine the timetable of the ships’ routes in the Black Sea.
From which ports?
Ukraine believes that exports can resume from Odessa and from its “satellite” ports, Pivdeni and Chornomorsk. “We are talking about Ukrainian wheat from Ukrainian ports controlled by Ukraine,” said Paul Toure, the director of the Supreme Institute of Maritime Economics (Isemar), stressing that Mariupol is excluded, since it is controlled by the Russians.
“For this reason we are not talking about sea trade but about an international solution to the food crisis”, he added.
What will happen to the mines?
Negotiators abandoned efforts to clear the Black Sea of mines laid mainly by Ukrainians to protect their coasts. “Demining would take too much time,” the UN explained, adding that Ukrainian pilot ships would clear the way for the trucks in the country’s territorial waters to avoid the mines.
Turkey, however, declared “ready” to help in demining. “In case of need, it is provided (by the agreement) that demining can be done by a third country. Turkey is ready to offer its help,” said Ibrahim Kalin, the spokesman for the Turkish presidency, speaking to the private NTV channel.
With which ships?
According to Toure, the ships that will be used will mainly be Turkish or Greek bulk carriers since Greece, as he reminded, has the largest fleet. These ships can carry 20-70,000 tons each.
Large European container ships whose products have already been processed in Ukrainian factories (flour or pasta) could also be made available to Ukrainians.
These ships will be inspected in Istanbul before they leave for Ukraine, by representatives of the four parties, to ensure they are not carrying weapons.
Will the itineraries be insured?
A large part of the Black Sea and the Azov Sea is no longer covered by marine insurance companies since the beginning of the war. The ships will therefore need “additional cover, which remains to be discussed”, explained Sylvain Godin, of reinsurance company Scor.
“The question will be how the insurers will calculate the risk and how they will take it. There will need to be a discussion about how this (sea) corridor will be organized, the counterparties will have a good understanding of what the security measures are, the military means available to ensure that ships pass safely,” he explained.
How much will it cost;
Extra premiums for the Black Sea used to amount to 5-7% of the ship’s insured value, Godin said, to give an order of magnitude. Typically, cargo insurance costs between 0.2-0.5% of its value, reaching up to 1% for older ships. “It’s a huge amount!” he noted.
“When we talk about war zones, costing is done on a case-by-case basis and costs can very quickly skyrocket,” said Mathieu Berurier, the managing director of freight forwarding company Eyssautier Verlingue.
And the crew?
“It is critical to guarantee the safety of crews if this agreement is to be implemented quickly,” commented the International Chamber of Commerce Shipping (ICS). “The question is (…) how can we effectively train ship crews in the area to meet deadlines,” he added.
How long will the business last?
“There is still a lot of work to be done,” the ICS insisted.
According to experts involved in the negotiations, three to four more weeks are needed to finalize the details and make the agreement operational. The Russian Defense Minister, however, considered it possible to start the process “within the next few days”.
The deal is valid for four months, which means 8 million tons will have to be exported every month to empty Ukrainian silos.
Source: RES-MPE
Source: Capital
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