LONDON: The risk of bombing makes it virtually impossible to insure ships leaving Ukraine via the Black Sea, so the sector has to find an alternative route, especially for grain.
In theory, cargo insurance can always be assessed “case by case”, Mathieu Berrurier, managing director of insurance broker Eyssautier-Verlingue, told AFP.
But with premiums rising to five to 10 times the amounts charged before Russia’s invasion of Ukraine in February 2022, companies are no longer paying.
Exiting Ukraine across the Black Sea has been steady for nearly a year after Moscow signed a deal allowing the warring country to export its agricultural output.
This allowed Ukraine to export 33 million tonnes of grain and helped to depress global food prices.
Boosting attacks
But Russia decided to back out of the grain deal brokered by the UN and Turkey and instead stepped up attacks on Ukraine’s shipping infrastructure.
Meanwhile, Kiev uses drones to target the Kerch Strait, which connects the Black Sea to the Sea of Azov, through which a significant amount of Russian exports pass.
“The risk has increased considerably” for cargo, Berrurier said. “Previously, the risks were centered on warships.
Most of Ukraine’s previously shipped grain exports now travel via the Danube River and by rail.
Ports along this alternative route are also under attack from Russia, according to Frederic Denefle, head of the French company Garex, which specializes in maritime risk insurance.
A Russian warship last month fired warning shots at a cargo vessel heading from Odessa towards the Ukrainian port city of Izmail on the Black Sea coast.
“Marine traffic has almost completely stopped” in the target areas, Denefle said, adding that scattered ships leaving the Odessa area have no grain on board.
In the middle of August, the cargo ship Joseph Schulte made it to Turkey.
It became the first cargo ship to do so from Ukraine since the end of the Moscow accord, but was carrying non-agricultural products.
Ukraine has so far sent four ships along the new sea route, while Russia is preparing a plan to send free food to some African countries and cheap grain for processing to Turkey.
Public-private partnership
International insurers, including brokerage firm Marsh, are in talks to provide cover for vessels passing through Black Sea ports as part of a public-private partnership with Ukraine.
The aim of the negotiations is to “reduce the cost of insurance to a more reasonable level”, said Marcus Baker, global director of Marine & Cargo at Marsh.
The goal is to create a letter of credit recognizing that Ukraine and some of its creditors will be party to the deal, which Baker said should be finalized “in a few weeks.”
The proposed mechanism will first insure against physical damage to ships before exploring coverage for the shipments themselves.
Turkish President Recep Tayyip Erdogan said after talks with his Russian counterpart Vladimir Putin on Monday that Ankara opposes alternative proposals to last year’s Ukraine grain deal, which Moscow scuttled in July.
Erdogan said Turkey and the United Nations had prepared new proposals aimed at solving Russia’s problems with the deal, adding that he hoped they would “reach a workable solution soon.”
“After consulting with the UN, we have prepared a new package of proposals. I believe that it is possible to achieve results,” he said.
“I believe that a solution will be reached soon that will meet Turkey’s expectations.”
