Lloyd’s in high level talks over Ukraine wheat cover

Lloyd’s is said to be in talks with the United Nations and the UK government having been approached to create a consortium that would insure the shipment of wheat and other food stuffs from Ukraine.

As the political row over the export of wheat from the war-torn country continues talks are underway to have the necessary insurance in place of the creation of safe passage corridors in the Black Sea, currently the subject of the naval blockade by Russia as it continues to persecute its invasion of the country.

It is estimated that at present there is around 22 million tonnes of grain trapped in Ukraine, which with Russia account for almost a third of the world’s wheat supply. Ukrainian grain is said to be relied on to feed millions across the world and the UN is keen to see the deadlock broken and exports resume. Ukraine is also a major exporter of corn, barley, sunflower oil and rapeseed oil.

The situation is compounded by the fact the second wave of Ukraine’s harvest is just weeks away and unless shipments resume there will not be enough storage capacity, putting the crops in severe danger of being lost.

The UN’s World Food Programme (WFP) has been increasing pressure on Russia to ease the blockade citing the growing global hunger crisis.

Earlier this month WFP Executive Director David Beasley said: “Right now, Ukraine’s grain silos are full. At the same time, 44 million people around the world are marching towards starvation.

“We have to open up these ports so that food can move in and out of Ukraine. The world demands it because hundreds of millions of people globally depend on these supplies.”

“We’re running out of time and the cost of inaction will be higher than anyone can imagine,” he added. “I urge all parties involved to allow this food to get out of Ukraine to where it’s desperately needed so we can avert the looming threat of famine.”

If the consortium is established it is likely to mirror a similar scheme created some years ago to facilitate food and aid deliveries to the Yemen. Under the scheme the UN assumed the first tranche of the risk, with the London market underwriting the excess of loss programme to keep premium costs to manageable levels.

However, there are still significant hurdles to overcome, not in the least the Russian refusal to allow the export of wheat corn and sunflower oil.

Russian deputy foreign minister, Andrei Rudenko, said that Moscow would be willing to create a “humanitarian corridor” for vessels carrying food to leave Ukraine, in exchange for the removal of trade sanctions and financial restrictions.

The waters around the ports have also been heavily mined with the Russians saying that the mines would need to be cleared by Ukraine, with both sides disputing which laid the mines.

Speaking in Davos, at the World Economic Forum, Ukrainian foreign minister Dmytro Kuleba said Ukraine was ready to agree on safe corridors in principle — but that it was not sure if it could trust Russia to abide by any agreement.

The issue, he said, was “how to guarantee that the moment we will create this safe passage and the entry to the harbour is demined, how to make sure that at night or early in the morning, Russia will not violate the agreement on the safe passage and its military vessels will not sneak into the harbour and attack Odesa.”

Sources confirmed that Lloyd’s CEO, John Neal, has been in discussions on the potential for such a scheme but any coverage would be predicated on the establishment of safe passage corridors.

The other issue would be the source of the capacity. While the UK government may allow insurers to cover the export of food stuffs, it is thought to be unlikely that US owned entities would be involved given the sanctions regime currently in place.

It is estimated that at present there is around 22 million tonnes of grain trapped in Ukraine, which with Russia account for almost a third of the world’s wheat supply. Ukrainian grain is said to be relied on to feed millions across the world and the UN is keen to see the deadlock broken and exports resume.

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