Russia's lack of ships and the reduced willingness of Western grain traders to cooperate with Moscow are creating huge challenges to the country's trade activities at a time when the war in Ukraine has spread to the Black Sea, Reuters reports.
The Background of Escalation in the Black Sea
Russian President Vladimir Putin has promised to replace Ukrainian grain with Russian deliveries to Africa following Moscow's withdrawal from the Black Sea Grains Agreement in July. Moscow has since blocked the neighbouring country and attacked its port infrastructure.
The Ukrainian response was loud: drone attacks on a Russian oil tanker and a warship in Novorossiysk. All these events have sharply increased the danger in the Black Sea. In addition, Ukraine has officially announced that it will take revenge for Russian moves and attack any Russian ship in the sea that it wishes.
Edward Zernin, head of the Russian Grain Exporters Association, fears a possible escalation of what he calls "hidden sanctions" which "could lead to an increase in transport and insurance costs" for Russia. "This would mean an increase in the prices of grain and other cereals for the global market," he told Reuters.
Moscow Forced to Use Small and Old Ships
The economic and other risks that plague Russian trade in the Black Sea mean particularly increased costs for Moscow. As a result, the country is forced to use more and more older and smaller vessels operated by less stable suppliers.
The situation raises doubts about Russia's ability to maintain a steady rate of exports. If it fails to do so, then the prices of these goods could see an even greater increase.
International companies specialising in freight transport are no longer helping Russia to sell its grain. For example, the multinationals Cargill, Louis Dreyfus and Viterra stopped working with the country on 1 July. However, Cargill continued to ship Russia's grain.
"It won't be easy for them [the Russians]," said an industry head with knowledge of grain exports.
In conclusion, the problem for Russia today is that although there is a demand for grain, insurance and transportation costs have increased dramatically, as has the risk of these ships being in Black Sea waters. Multinational companies have stopped helping Moscow, so the country has to cope with this situation on its own and quickly deal with the lack of ships in some way.