Russian Aggression Forces Ukraine to Seek Alternative Grain Export Routes
The threat of Russian aggression towards Ukraine’s Black Sea ports and ships will force the country to export its enormous quantities of grain by river, road, and rail — all of which are fraught with challenges.
After exiting the Black Sea grain export deal earlier this week, Russia announced that all ships headed to Ukrainian ports will now be considered military vessels. With harvests coming in, that means Ukrainian farmers will no longer be able to rely on the route that was used to move about half of last season’s crops.
That adds to pressure on global food markets and delivers a serious blow to one of Ukraine’s biggest sources of revenue.
The Black Sea historically ushered the vast majority of Ukraine’s grain exports abroad and helped the country become one of the world’s top suppliers. Cutting off the ports will reduce Ukraine’s monthly export capacity from about 7-8 million tons to a maximum of about 4 million tons, estimated Alexandre Marie, chief analyst at Agritel.
It also adds to a host of logistical problems. The news has stoked renewed fears of global food inflation and will put additional financial pressure on Ukrainian farmers. It forces the country to double-down on lengthier and costlier routes to global markets — the most obvious being the Danube.
Overland routes are also challenged by the fact that Eastern European nations are continuing to push back against crop inflows from Ukraine on behalf of local farmers who have protested that the imports pose a threat to their livelihood.
Of these options, Danube River ports, in particular, “are going to be extensively relied on,” said Michael Magdovitz, senior analyst at Rabobank. From the Danube, grain can either be transported directly to nearby buyers or shipped to hubs like Constanta in Romania, where it is loaded onto bigger ships for longer journeys. One difficulty, however, is that because larger vessels can’t travel on the river, “you’re going to be squeezing logistics through this very small channel,” said Mr. Magdovitz.
The heatwave gripping southern Europe is compounding the issue.
In Romania, the Danube is nearly 40% lower than the average level in July because of high temperatures, according to Romania’s water management institution. It remains well above the two-decade low reached last year but could decline further next week.
Rail and road routes will also be key. Although Eastern European nations are continuing to push back against the purchase of Ukrainian grain, the countries are still allowing crops to transit through their borders to make deliveries.
Russia has said it would be willing to return to the deal if its conditions are met. It has for months demanded that one of its agricultural banks be reconnected to the SWIFT international payments system. Russian banks were cut off from SWIFT after the invasion of Ukraine.