Istanbul Those who are currently in Istanbul can watch merchant ships sailing through the strait towards the Black Sea on the Bosphorus. But it doesn’t take long before they meet again: instead of reaching their destination port in the Black Sea to accept goods or raw materials, they have to turn back.
“Many bulk carriers that can transport coal, cement or grain have aborted their mission early and are heading back to the Mediterranean through the Bosphorus,” says Mark Nugent of shipbroker Braemar ACM. The company monitors freighters using satellite data.
The Russian invasion of Ukraine is not only upsetting politicians worldwide. The global economy is also shaking because a particularly sensitive region is affected: the Black Sea and its neighboring countries.
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Grain, oil, steel and other products are traded through the region. The prices for these products are rising sharply in some cases: the price of grain has risen by more than 25 percent since February, and that of crude oil by a good 17 percent.
Oil, grain, steel: many exports go across the Black Sea
If trade across the Black Sea continues to falter, there could be other repercussions. “Due to the dangerous potential of an invasion by sea, much of the cargo destined for surrounding countries is likely to be diverted,” said Glenn Koepke of Bloomberg’s FourKites tracking platform. This will significantly increase the transport time.
Aid organizations have warned that the war in Ukraine will have serious consequences for the food supply, particularly in countries in the Arab world and western Asia. “Already 276 million people in 81 countries are affected by acute hunger,” said the director of the World Food Program of the United Nations (WFP) in Germany, Martin Frick, the German Press Agency. More than half of the food that the WFP distributes in crisis regions comes from Ukraine.
Egypt gets most of its wheat imports from Russia and Ukraine by ship. The same applies to Tunisia, where experts are already warning of sharp price increases as a result of the war. Other countries in West Asia are facing similar problems.
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Turkey is dependent on Moscow in several areas. In 2020, around 65 percent of wheat imports came from Russia and came by sea. A deterioration in relations could make imports more expensive.
Turkey is already shaken by a currency crisis and high inflation, and there have been protests in many places over the past few weeks because of food price increases. If, for example, bread prices should rise again, this could also increase anger against the government of President Recep Tayyip Erdogan, who has sought proximity to Russia.
The EU agriculture ministers will discuss the effects of the Ukraine war on the international food markets on Wednesday. “The invasion of Ukraine carries the risk of disrupting global markets for agricultural products,” it said. Energy and the production of goods such as fertilizers are also affected. According to the information, world market prices have already risen sharply since the beginning of the war.
Two Ukrainian steelmakers are based in Mariupol – the Black Sea port that the Russian Navy has cut off from the outside world.
(Photo: dpa)
A large part of the world’s exports of oil, grain and steel pass through the Black Sea. But the Russian war of aggression in Ukraine and off the country’s coast is blocking important ports such as the port of Odessa. After the Russian Navy shelled foreign merchant ships, the risk of sending ships to the region at all also increases – and with it the price continues to rise.
Three terminals in Russia and Georgia
The Black Sea is rarely in the focus of international observers when it comes to world trade. Large quantities of important raw materials and products are traded across the inland sea – also for Europe.
More than 1.8 million barrels of crude oil are exported daily via three terminals in Russia and Georgia. The CPC terminal in Novorossiysk, Russia, also handles crude oil coming from Kazakhstan.
Romania and Bulgaria, on the other hand, import more than 200,000 barrels a day via their Black Sea ports. Added to this are oil imports from the Mediterranean via the Turkish Straits. Refined diesel and marine diesel are also exported to the world via the Black Sea.
The export of Ukrainian steel is also becoming increasingly difficult. A tenth of all European steel imports come from the country. Any disruption in supply would further drive up the already record high price of steel. Two Ukrainian steelmakers are in Mariupol – the Black Sea port that the Russian Navy has now cut off from the outside world.
In addition, Russian and Ukrainian ports handle a quarter of world wheat exports, a fifth of corn exports and a significant part of world sunflower oil exports. Ports of destination are in the EU as well as in Africa and Asia.
The Russian invasion has halted a total of 150 freighters. According to industry information, it is therefore uncertain whether 13.5 million tons of wheat and 16 million tons of corn will ever reach their destination port.
According to specialist portals, buyers from Indonesia, Tunisia, Uruguay, India and several European countries have already considered whether they can cover their needs for these two goods from other export countries. This should continue to drive up wheat and corn prices.
Ship insurance is becoming more and more expensive
Even if trade through the Black Sea resumes shortly, it is likely to be expensive. According to information from the Reuters news agency and various insurance specialist portals, several marine insurers have therefore raised the premiums for war risks and driving through high-risk areas.
In the London market for marine insurance, several providers have classified the region as a high-risk area – with consequences for the insurance of merchant ships navigating the Black Sea.
Normally, the premium is around 0.025 percent of the sum insured for a merchant ship and is calculated over seven days. But the shelling of foreign merchant ships has drastically increased the risk of a trip to the Black Sea from the insurers’ point of view.
A chemical tanker flying the Moldovan flag was hit by Russian projectiles on Friday. Two crew members were injured. A day earlier, cannonballs hit a Turkish ship in the port of Odessa.
In the meantime, one to five percent of the sum insured is required for ships sailing through the Black Sea. That’s 40 to 200 times what it was before the Russian invasion began. Instead of an average of around USD 8,000 per freighter or tanker, ship owners and exporters now have to pay up to USD 100,000 for insurance.
“It would not be surprising if individual insurers for ships in the region soon stopped offering policies,” the Reuters news agency quoted an insurance manager as saying. That would drive prices even higher.
More: Despite the Bosphorus lockdown: Turkey does not want to take a hard line against Moscow