Ukrainian grain deal under pressure as war intensifies

The Black Sea Grain lnitiative, which provides vital food supplies for millions across the world, is still under increasing threat from Russia as the war in Ukraine goes badly for the country.

Speaking to Emerging Risks, Cormac McGarry, who has primary responsibility for maritime intelligence and security services at Control Risks, said the threat of Russia refusing to allow the safe passage of grain out of the three key Ukrainian ports in the Gulf of Odessa on the Black Sea remained real.

The initiative, which allows Ukrainian grain and wheat to be exported from the country, was brokered between Russia, Ukraine and Turkey with the International Maritime Organisation also involved.

London market insurers have also stepped in to provide specific insurance coverage for the vessels involved; the Ascot-led facility, first revealed by Emerging Risks, is placed by Marsh.

It sees officials from both warring nations sitting in a control centre inTurkey ensuring that the vessels that are transiting the corridor are only exporting foodstuffs.

However McGarry said the deal was still a major political weapon for Russian president Vladimir Putin, which he might play if the war continues to go against his country.

“The initiative has been seen as a diplomatic weapon and it is one that Putin might play if the trajectory of the war goes against the Russian forces,” he explained. “When the Crimean Bridge was destroyed the Russian threatened to end the initiative, and looked to be doing so but then failed to enforce it.

“While it was a surprise, there is no doubt that it is something that Russia could and potentially would do in the future. If they threaten to do so again, they may decide to deliver on the threat. However it is a major international diplomatic agreement, and it would not be done lightly.”

While the grain shipments continue there are still over 70 vessels which remain trapped in Ukrainian ports since the war began on 24 February this year.

Some of those vessels have been damaged after being attacked, some have suffered damage by sea mines and there are vessels trapped in the ports either without their crews or with their crew still on board  as the decision was taken that it is simply too dangerous to leave.”

McGarry added: “It is clear that these vessels have been detained due to the direct action of a war.”

As such with some war risk insurance policies having a six month detention period before a claim can be made insurers will have been dealing with hull claims since August with those policies which have a 12 month detention period  now only two and a half months away from generating a claim.

The prospects for the war to end in the coming months is remote according to Anna Walker, an expert on the former Soviet Union, Russia and Eastern Europe at Control Risks.

“The chances of a negotiated settlement are slim,” she explained. “The Russian troops are digging in on the east bank of the Dnipro River and we would expect that Ukrainian forces will take more territory in the winter months up until March next year.

“The Ukrainians are keen to continue to fight and will not look to enter negotiations with Russia if those talks are not on their terms. There is also no push in Russia for any negotiation and we expect that we will see a further mobilisation of the Russian population in the coming months.”

She added: “While the have been complaints around the mobilisation of conscripts they have been around the issues of sending untrained troops into battle rather than questions the war itself.”

While the grain shipments continue there are still over 70 vessels which remain trapped in Ukrainian ports since the war began on 24 February this year.