Insurers will have to bear the risk of getting grain out of Ukraine

<strong>Insurers will have to bear the risk of getting grain out of Ukraine</strong>
Finance

The Russian foreign minister, Sergei Lavrov, and the Turkey foreign minister, Mevlüt Çavuşoğlu, met in Ankara on June 8 to discuss a grain shipping deal. 

This deal would create a way for ships to transport grain out of Ukraine. A deal like this would be great for the current state of food security globally.

Lavrov and Çavuşoğlu discussed an arrangement that would allow the Russian military to scrutinize incoming ships for weapons. 

When Russia launched its attack on Ukraine, it barricaded the country’s Black Sea ports, including Odesa, preventing ships from leaving or entering. 

The surrounding waters are also covered with floating mines. To create a grain corridor, the country would first have to demine the waters.

The commerce ships would be safely guided by Turkish ships, and Ukraine would have to demine its shore as part of the agreement. 

In response, Kyiv stated that it would demine a naval corridor only if Ukraine was assured that Russia would not strike its ports.

The director of the Ukrainian National Agrarian Forum, Mariia Didukh, said, “Before the war, more than 90% of all Ukrainian agri-food export was done by sea.”

She added that only a fifth of the regular monthly export quantity, equivalent to 1.2 million tonnes of agricultural products, were exported out of Ukraine during the first three months of the war.

Didukh stated that her organization had been developing alternative ways to export the needed agricultural products, including “railway, trucks, and some Danube ports in Romania.”

If the agreement is finalized, it will accomplish what several months of negotiations have failed to do; allow unfettered transport of urgently needed Ukrainian grain. 

To export the grain, ships would have to risk traveling to Ukrainian ports, reclaiming grain, and transporting it out of the Black Sea with the help of a naval corridor and escort.

According to the International Grains Council, between 5 million and 6 million tonnes of grain were exported from Ukraine’s seaports every month before the war.

Due to the war, shipping businesses have lost approximately $5 billion, and the losses continue to mount even though there is currently little marine trade.

Insurers and shipping companies are scared of incurring additional financial losses. 

There are 20 million tonnes of grain stranded in the country. Unfortunately, it’s companies that transport grain, not governments. 

To avoid a worldwide food catastrophe, shipping companies, insurers, and reinsurers must be assured that any solution reached by governments will make the Black Sea waters secure for their ships, personnel, and cargo. 

Cormac Mc Garry, a maritime analyst with Control Risks, says, “The shipping business is very risk-tolerant.” 

He adds, “On an average day, a seafarer faces more risk than most individuals do in a lifetime, and that risk tolerance filters down to the corporate level.”

However, if the government manages to create a grain corridor, a few shipping companies and insurers will likely step up to the plate.

The Russian foreign minister, Sergei Lavrov, and the Turkey foreign minister, Mevlüt Çavuşoğlu, met in Ankara on June 8 to discuss a grain shipping deal. 

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