Ukraine Seeks Solutions to Export Its Grain – Reuters

By Pavel Polityuk and Silvia Aloisi

KYIV – Ukraine is actively exploring options to transport grain and vegetable oils out of the country in an effort to overcome a prolonged blockade of the Sea of Azov and the Black Sea by the Russian navy. In addition to seeking maritime solutions, the country is also looking to increase land transportation.

The ongoing conflict, compounded by Western sanctions against Russia, has led to a dramatic increase in prices for grain, cooking oil, fertilizer, and energy. This situation poses a significant risk of a global food crisis, particularly for nations that depend on imports of wheat from Russia and Ukraine, which together supply over half of the world’s wheat needs, including many impoverished countries.

Both Russia and Ukraine are vital players in the global grain market, accounting for nearly a third of total wheat supply. Their significance has been highlighted by an export ban from India and adverse weather conditions affecting crops in North America and Western Europe.

In addition to wheat, Ukraine is a key exporter of corn, barley, sunflower oil, and rapeseed oil. Meanwhile, Russia and Belarus, its ally in the conflict, contribute to over 40% of the global exports of potash, a crucial crop nutrient.

HOW MUCH GRAIN IS STUCK IN UKRAINE?

Grain exports are a cornerstone of Ukraine’s economy, amounting to $12.2 billion in 2021 and representing about 20% of national exports. Before the war, Ukraine exported 98% of its cereals and oilseeds through the Black Sea, at a rate of up to 6 million tonnes monthly. Currently, due to the blockade and increased pressures on the railway system, exports have plummeted to approximately 1-1.5 million tonnes per month.

U.S. Secretary of State Antony Blinken recently condemned Russia for using food as a weapon, claiming the country is holding supplies "hostage" not just for Ukrainians, but for millions worldwide. The Kremlin counters that the crisis was initiated by Western sanctions against Russia.

A United Nations food agency official reported that as of early May, nearly 25 million tonnes of grain remained stuck in Ukraine due to infrastructure issues and the naval blockade. The surge in prices has forced UN agencies to reduce food rations for refugees and displaced individuals in various regions, including parts of the Sahel.

WHY CAN’T THE GRAINS GET OUT OF UKRAINE BY LAND?

Exporting grain by train presents challenges, as Ukraine’s rail system operates on a different gauge than that of its European neighbors like Poland. This necessitates the transfer of grain to different trains at the border, where there is insufficient transfer and storage infrastructure.

Ukraine is also working to increase shipments via the Romanian Black Sea port of Constanta, but as of mid-May, only about 240,000 tonnes, or 1% of the stranded grain, had successfully passed through this route. Transporting grain to Romania requires rail transport to Danube ports and then loading onto barges to reach Constanta, complicating the process and increasing costs.

WHAT OTHER OPTIONS ARE BEING DISCUSSED?

Western nations have been considering the establishment of "safe corridors" to facilitate grain shipments from Ukrainian ports. However, officials warn that implementing such corridors would require Russian approval.

Ukraine insists on needing "guarantees of security," with Deputy Economy Minister Taras Kachka expressing that having "vessels from third countries in the area… would be an ideal situation." The Russian foreign ministry has indicated that any potential concession to provide access to Ukraine’s Black Sea ports would also require discussions about lifting sanctions against Russia.

The scenario is further complicated by drifting mines in the Black Sea, with both sides blaming the other for their presence. Insurance costs for vessels navigating these treacherous shipping lanes are expected to be significantly high.

As the situation becomes increasingly urgent, there is a growing shortage of grain storage space in Ukraine. By the time the next crop is harvested in July, up to 35% of the total storage capacity of 61 million tonnes could be occupied by the previous year’s crop, according to the research center APK-Inform.