After the expiration of the Black Sea grain shipping agreement in July this year without an extension, Ukraine, a major grain-producing country, faced the urgent challenge of continuing its grain exports.
Before the Russia-Ukraine conflict, agriculture accounted for 10.9% of Ukraine's GDP and created 15% of employment. Agricultural products are also Ukraine's most important export category, contributing 41% to the country's total exports in 2021.
To rescue its agriculture sector, Ukraine began using the port of Izmail on the Danube River for grain shipments. Prior to this, Ukraine transported grain to European Union countries like Poland via land routes and railways.
However, rail transport was time-consuming, and farmers in countries like Poland protested against the influx of low-priced Ukrainian grain into their markets. The Danube River ports had insufficient capacity and doubled costs, making the Black Sea still the most ideal route for Ukraine's grain shipments.
In August, Ukraine tentatively opened a temporary Black Sea corridor.
After the Black Sea grain shipping agreement was nullified, Russia warned that ships heading to Ukrainian ports via the Black Sea would be considered potential military material transport vessels. Ukraine, in turn, warned that ships entering Russian ports through the Black Sea might be viewed similarly.
With Russia relocating some of its Black Sea Fleet ships away from the Crimean Peninsula's Sevastopol port, Ukraine's temporary Black Sea corridor continued to operate, with over a hundred vessels successfully passing through this corridor established unilaterally by Ukraine.
Last week, Bridget A. Brink, the U.S. Ambassador to Ukraine, announced on Platform X that to date, 153 ships have successfully passed through Ukraine's Black Sea transport corridor, transporting 5.6 million tons of grain and other goods.
Ukraine's Agriculture Minister Mykola Solskyi stated that in October, Ukraine exported 4.3 million tons of grain through various channels, with a target of at least 6 million tons per month through the Black Sea corridor in the future. According to data from Ukraine's Ministry of Agriculture, grain exports in the 2023-2024 agricultural year (starting in July) have already decreased by 28% compared to the same period last year.
Despite the ongoing Russia-Ukraine conflict, this year's climate has been favorable for the growth of Ukrainian grains and oilseeds, and the country's grain harvest is expected to exceed last year's.
The Ukrainian Grain Association predicts this year's grain harvest will reach 80 million tons, 8% higher than last year. The International Grains Council forecasts Ukraine's production will be close to 59 million tons this year, higher than the previous estimate of 47 million tons. Increasing grain exports, securing farmers' income sources, and clearing warehouses for next year's production have become key to saving Ukraine's agriculture.
Ukraine's grain shipping capacity not only affects its domestic economy but also impacts the international market. After the Black Sea grain shipping corridor was nullified, the FAO's global food price index rose 1.3% month-on-month in July, with wheat prices seeing their first month-on-month increase in nine months, and the indices for vegetable oils and rice prices surged.
However, with a decrease in global import demand and sufficient supply from major exporters other than Ukraine, the global food price index has been declining from August to October. The FAO's global food price index for October decreased by 0.7% month-on-month, with the grain price index falling by 1%.
Due to higher-than-expected wheat supplies from the U.S. and increased wheat exports from Brazil, international wheat prices fell by 1.9% month-on-month in October. Before the Russia-Ukraine conflict, Ukraine was the world's fourth-largest wheat exporter.
In the Black Sea grain shipping agreement, ships departed directly from three Ukrainian Black Sea ports across international waters to Turkey, where the cargo was inspected. In the Black Sea corridor unilaterally established by Ukraine, the starting point is the Black Sea port of Odessa in Ukraine. Ships depart from Odessa, closely follow the Ukrainian Black Sea coast into Romanian and Bulgarian territorial waters, and then enter Turkish waters.
Romania, Bulgaria, and Turkey, all NATO members, provide a safer passage for ships, reducing the risk of them becoming Russian targets. However, the corridor's starting point, Odessa, remains a potential target for attacks.
Earlier this month, a Russian missile struck a cargo ship docked at the port of Odessa, resulting in the death of a dock worker and injuries to three crew members. The ship, carrying iron ore and flying the Liberian flag, was originally destined for Asia.
Two weeks prior, a wheat transport ship chartered by the American agricultural giant Cargill was attacked by an explosion after departing from a Ukrainian Black Sea port. The attack caused no casualties, and the vessel subsequently headed to Romania for repairs and inspection.
Following these incidents, Ukraine's Black Sea corridor continued to operate, but insurance costs soared. After the missile attack earlier this month, war risk insurance premiums for each ship temporarily rose to 3% of the vessel's value.
To prevent shipping companies from avoiding the Black Sea temporary corridor due to high insurance costs, the Ukrainian government and the Ukrainian Export-Import Bank reached an agreement in mid-November with Lloyd's of London and 14 other insurance companies to provide discounted insurance for ships using the Black Sea temporary corridor.
In addition to reducing insurance costs, Ukraine is also preparing to increase protection for ships in the Black Sea. Last Sunday, Ukrainian President Volodymyr Zelenskyy announced that the government would deploy escort fleets to protect ships using the Black Sea corridor, with partner countries providing warships to Ukraine. Ukraine has also signed agreements with other countries to purchase air defense systems to protect the Odessa region.
Despite Ukraine's intentions to enhance the security of the Black Sea temporary corridor, risks remain.
The corridor's continued operation is partly due to Ukraine's intensified drone and missile attacks on Russia's Black Sea Fleet. To avoid damage to its ships, Russia relocated part of its Black Sea Fleet from Sevastopol in Crimea to Novorossiysk on Russia's northeastern Black Sea coast.
Some Western media believe that Russia's relocation of ships from Crimea to Novorossiysk indicates a loss of maritime control over the Black Sea. However, Sidharth Kaushal, a researcher at the Royal United Services Institute in the UK, noted that after frequent drone attacks on Sevastopol in Crimea last winter, Russia had also moved Black Sea Fleet ships to Novorossiysk.
Subsequently, the Black Sea Fleet ships returned to Crimea, continuing to maintain control over the Black Sea. Kaushal stated that although Ukraine's recent offensive on Sevastopol was stronger, the idea that Sevastopol had lost its defensive capabilities was "completely wrong."
