Russia faces wheat exports shipping challenges after attacking Ukraine – Reuters

The lack of Russian ships and grain importers shrinking appetite for business with Moscow amid increased danger in the Black Sea are contributing to the risingcost of exporting Russian wheat, Reuters reported on Aug. 8.

The financial and security risks associated with trading with Russia – compounded by the Black Sea corridor collapse – are driving up freight costs for Moscow and pushing it to use older and smaller vessels run by less established shipping operators, Reuters reported.

Even though agriculture exports are not subject to direct European and U.S. sanctions imposed after Russia invaded Ukraine last year, Moscow complains that restrictions placed on banking and Russian individuals are “hidden sanctions” on the food trade.

The situation is raising doubts about whether Russia can keep up its level of exports and, if not resolved, could push global wheat prices higher, Reuters stated.

Global commodity houses are no longer helping Russia with trading mechanisms. Cargill, Louis Dreyfus, and Viterra stopped their operations with the country on July 1, adding more pressure on Moscow to handle all aspects of grain deals, including transport.

Last year, Russia exported a record volume of wheat on ships chartered by international companies and traders. While exports had remained strong, recently Russia has had to source more of its own freight, increasingly relying on a “shadow fleet” of older vessels typically operated by companies based in Turkey and China, three shipping industry sources told Reuters.

“There is very little coming out now for international companies,” said a shipping executive, who spoke to Reuters anonymously.

“Most of what is coming out is dealt with by Russian traders using (shadow) fleet ships, which international traders would not touch.”

Insurance for ships heading to Russia’s Black Sea ports currently costs tens of thousands of dollars in additional premiums daily, the three sources said, with rates ticking higher following Russia’s attacks on Ukraine’s other waterways through the Danube,  as well as Kyiv’s response.

Russian grain exports will fall about 8% during the 2023-24 season from Russia’s high last year of 60 million tons, Russia’s Agriculture Ministry told Reuters.

Russia’s withdrawal from the grain initiative

Russia officially announced the termination of the grain deal on the pretext of repeated attacks on the illegally built Crimea Bridge.

Russia had been sabotaging the deal since April by refusing to carry out inspections of ships, as required by the deal, leading to a backlog of unloaded ships.

Russia said it was unhappy with the conditions of the deal and demanded that its state agricultural bank be allowed to use the SWIFT interbank transfer system again. The United Nations proposed that a U.S. bank or a specially-created subsidiary bank be set up to allow for Russian payments for agricultural exports, but the Kremlin refused to accept this compromise.

Ukrainian President Volodymyr Zelenskyy then offered to extend the grain deal with the UN and Turkey, but without Russian participation.

The grain corridor originally mediated by the United Nations and Turkey had allowed Ukraine to export grain from three of its Black Sea ports starting from Aug. 1, 2022.