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Kyiv is counting on the British government to allay sea captains’ fears about sailing in the heavily mined waters of the Black Sea, as efforts are underway to implement a deal to ease a global food crisis.
As part of the agreement negotiated on Friday with the United Nations and Turkey, Moscow has pledged not to attack merchant ships exporting grain from Ukrainian ports like Odessa, blocked since the start of the Russian invasion. The five-month onslaught trapped millions of tonnes of staple grains like wheat and corn inside the country, as global food prices soared because Ukraine is a major global exporter of cereals to many import-dependent countries in Africa and the Middle East.
But Russia’s missile attack on Odessa just hours after the deal was signed underscored how dangerous it will be to navigate the Black Sea amid the ongoing war, and raised fears that major traders are thinking twice before leaving for Ukraine due to the high insurance costs of their ships. (Moscow claimed the Odessa strikes targeted military targets while Ukraine claims grain export infrastructure was damaged.)
Ukraine’s Infrastructure Minister Oleksandr Kubrakov, who signed the deal last week, told POLITICO in an interview that he was in talks with the UK government to provide those guarantees and ease traders’ concerns.
“We have started these discussions, but for now it is only on our side. We will start several discussions with [the] UK as well, with some international financial institutions,” Kubrakov said.
On Monday, British Foreign Secretary and Prime Minister Liz Truss went further, saying during a televised debate with her leadership rival Rishi Sunak that “a deal has been reached” with Kyiv on marine insurance for the movement of grain from Odessa. London is a global hub for the marine insurance industry, home to major players like Lloyd’s.
A UK Foreign Office spokesman later wrote in an email: “We are in close contact with the insurance industry to secure commercial maritime guarantees which support the UN initiative to allow the shipment of grain out of Ukraine”.
Contrary to what Truss said, Kubrakov said in Wednesday’s interview that no such deal has yet been finalized, but he hopes there will be one “soon.” He added: “The idea is not just to subsidize, the idea is to provide additional safeguards.”
Kubrakov said Ukraine also wanted to start talks with the World Bank to use its “insurance mechanism” and with the London-based European Bank for Reconstruction and Development, although a spokesman for the EBRD downplayed the prospect of such discussions.
Analysts see seafarer confidence as the next stumbling block to the deal and so marine insurance is a crucial factor in ensuring it holds.
“The big question will be how many ships will come into port – that will be the litmus test,” said Mike Lee, director of London-based Green Square Agro, a consultancy specializing in sea harvest forecasts. Black.
“No matter what deal is struck, if shipowners and insurance companies can’t rack up the numbers, then no one is putting ships at risk,” Lee added.
Kubrakov said the additional insurance guarantees would help reduce the cost of logistics and increase the margins that cash-poor Ukrainian farmers currently get for their crops.
Larysa Bilozir, an independent Ukrainian MP, said the high cost of marine insurance could prevent the Black Sea grain deal from reaching its full potential. “Freight before the war was $30 a ton, it will probably be $200 now,” she said in an interview. “I’m sure it will be five, six times more expensive because of the insurance and the big risk.”
On Wednesday, Turkish Defense Minister Hulusi Akar officially opened a so-called joint coordination center in Istanbul, where, under the terms of the agreement, officials from the UN, Turkey, Ukraine and Russia will remotely monitor and organize the movement of ships to and from ports around Odessa and through the Turkish Strait.
Kubrakov said he hoped the first ships could start ferrying grain from ports this week and would likely depart from Odessa or Chornomorsk. Private vessels will form a meandering convoy with a vessel from Ukraine’s Ministry of Infrastructure in the lead to lead them safely past the sea mines.
On Tuesday, Ukrainian media reported that Russia had rained missiles on port infrastructure in Mykolaiv, Ukraine’s second-largest grain port after Odessa but not covered by the UN deal. .
“These attacks increase the risks for sure,” Oleksiy Goncharenko, a Ukrainian lawmaker representing Odessa, told POLITICO.
Infrastructure Minister Kubrakov said that once the UN plan is fully underway, Russia would cross a de facto red line if it were to bomb grain ships or silos in ports.
Although Ukraine would “never” withdraw from the deal, the deal would simply stop working in this scenario because such an attack from Russia would scare off traders for good, Kubrakov said.
Hunger for a solution
Ukraine’s government has pledged to continue with the deal despite Russia’s attack on Odessa, underscoring how crucial restarting grain exports is for its war-ravaged economy.
If the fragile UN deal is fully implemented, between 15 and 20 million tonnes of grain could be shipped, 90% of which is neither already on ships nor stored in ports, Kubrakov said.
Time is running out for the program to be fully operational, as 6.5 million tonnes of cereals from the summer harvest have already arrived, with no less than 60 million tonnes more expected.
Kubrakov said ports such as Mykolaiv, which is close to the front line, and the busy Sea of Azov ports, Berdyansk and Mariupol, could one day be included in the scope of the deal, which will automatically roll over into November unless one of the four sides exits.
“For us – and I think for all participants, for the United Nations, for all countries – it is important that this initiative works for more than four months,” he said.
Meredith Lee and Hanne Cokelaere contributed reporting.
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