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Is Ukraine’s new Black Sea corridor working? Experts say it has potential

by Dominic Culverwell October 28, 2023 7:21 PM 6 min read
The Maranta tanker is currently heading to Ukrainian Black Sea ports under the temporary route set up by the Ukrainian government in August following the collapse of the Black Sea Grain Initiative (Oleksandr Kubrakov/ X)
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Perplexing reports earlier this week that Ukraine had suspended its temporary grain corridor in the Black Sea sparked confusion and concern.

Kyiv-based Barva Invest consultancy reported on Oct. 26 that Ukraine had temporarily halted the use of its new trade route in the Black Sea due to the potential threat from Russian warplanes and sea mines.

Infrastructure Minister Oleksandr Kubrakov quickly denied the reports, saying on X that “The information regarding the cancellation or unscheduled stoppage of the temporary Ukrainian corridor for the movement of civilian vessels from and to the ports of the Big Odesa (region) is false.”

The new corridor’s suspension could have dealt yet another blow to Ukraine’s agricultural sector after the collapse in July of the Black Sea Grain Initiative. Ukraine set up its own trade route in August to move food exports out of its Black Sea ports near Odesa, defying Russian threats.

Despite exporting significantly lower volumes than the grain initiative brokered by Turkey and the UN last year, experts say Ukraine’s new trade route may be picking up steam.

Ukraine set up its own trade route in August to move food exports out of its Black Sea ports near Odesa, defying Russian threats. (United Nations/Lisa Kukharska)

As of late October, Ukraine has managed to export nearly 700,000 metric tons of grain through the temporary corridor — a start, but a fraction of the more than 30 million metric tons of food commodities exported under the grain initiative.

Ukraine was shipping up to six million tons of grain monthly from its Black Sea ports before the start of Russia’s full-scale invasion in February 2022.

A total of 62 vessels have already used the corridor and 37 vessels carrying over 1.3 million metric tons of goods, including agricultural and metal products, have already departed the ports of Odesa since its inception, Kubrakov announced on Oct. 27.

Moscow has threatened to target vessels coming and going to Ukraine’s ports, putting many shipowners on edge. But the new route has become a lifeline for Ukrainian farmers struggling to get their products out of the embattled country.

“It’s still early days for the temporary corridor, but it’s encouraging to see a fairly steady flow of inbound ships. More vessels clearing the ports without incident will also help reassure other interested shipowners who may be on the fence,”  Bridget Diakun, data analyst for Lloyd’s List Intelligence, told the Kyiv Independent.

Humanitarian corridor

Following the end of the grain initiative, Ukraine launched what it called a humanitarian route allowing a way out for vessels that had been stuck at Ukraine’s Odesa ports since the start of the full-scale invasion.

After several successful voyages, Ukraine saw an opportunity to export goods along the humanitarian corridor. The first ship departed last month.

Rather than sailing directly through international waters to the Bosphorus Strait — the quickest route — ships hug the coastlines of Ukraine and NATO members Romania and Bulgaria guided by the Ukrainian Navy. Sailing through NATO waters provides extra security.

Additionally, several successful Ukrainian naval attacks have forced the Russian Black Sea fleet to retreat, bolstering shipowners’ confidence. Kyiv has also requested international assistance to help vessels navigate the waters safely, including patrolling and trawling the sea.

Ukraine’s security measures are paying off, and freight prices have dropped by around 30% in the last month, lawmaker and member of the Agrarian and Land Policy Committee Dmytro Solomchuk told the Kyiv Independent.

With further security measures, such as more air defense and aircraft for Ukraine’s Armed Forces, these prices could drop even further, Solomchuk says.

Risk management

The Black Sea is much more efficient than the alternative routes. The seaports are deeper than the Danube River ports — currently the main exit point for Ukrainian goods — allowing larger vessels to enter and Ukrainian farmers to export higher volumes.

Over nine Panamax ships, some of the biggest grain cargo ships, have entered the seaports, Bloomberg reported earlier this month, citing data — a sign that some ship owners are prepared to take the risk to send bigger and more valuable ships through the dangerous waters to Ukraine.

To encourage vessels, Ukraine is bearing the brunt of insurance costs and has allocated Hr. 20 billion ($54.8 million) to cover losses in the event of shipwrecks of vessels carrying Ukrainian food products, Solomchuk told the Kyiv Independent.

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For extra padding, Ukrainian authorities also partnered with British insurance broker Miller and maritime intelligence company Clearwater Dynamics to cover ships leaving the Greater Odesa ports.

“This is all so that shipowners from different countries under different flags can more confidently agree to leave the ports of Ukraine,” the lawmaker said.

Nevertheless, the corridor still has a long road ahead. In the first half of October, it only made up 15.7% of exports, analyst Olivia Bonser from the Agriculture & Horticulture Development Board told the Kyiv Independent, adding that the Danube River remains the favored option.

Black Sea vs. the Danube River

Although vessels have not come under any attacks along the temporary corridor so far, the Russian threat in the Black Sea persists.

“There’s always a chance that something will change and if it does then traders could be scared off pretty quickly,” Diakun said.

Russian President Vladimir Putin announced last week in a televised address that Russian jets armed with Kinzhal hypersonic missiles will permanently patrol the Black Sea.

In light of the risks, shipowners see the Danube as a safer bet, according to Bonser. The river’s ports exported 2.3 million metric tons last month — the highest volume of agricultural goods.

But the river ports are more expensive than the temporary corridor and riddled with problems. They were rarely used before Russia’s full-scale invasion and the logistics route and supply chain were not designed for such high turnover.

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“Most Danube loading points are made for smaller boats and the number of loading points for bigger ships are limited,” Bonser explained.

Another issue is the lack of pilots, according to Diakun. Romania increased the number of pilots at the crossing in August to speed up the process; however, Diakun notes that more are needed.

“To make (the ports) more efficient you need to tackle the issue of getting the ships in and out in a timely manner, which includes everything from the pilots to improving the actual infrastructure of the ports and modernizing systems,” she said.

Bucharest assured Kyiv that it is working to improve infrastructure facilities at the ports and recently installed anti-drone systems to better defend facilities from Russian attacks.

Export turmoil

Ukrainian farmers are grappling with severe export problems exacerbated by the Russian blockade of Ukraine’s seaports and relentless strikes on infrastructure in Odesa and the Danube.

Agricultural exports only reached 3.6 million metric tons last month, according to Agriculture Ministry data, compared to 6.8 million tons in Sept. 2022.

Problems also lie in the marketplace as farmers struggle to compete with cheap Russian grain, despite dropping their prices.

Consequently, Ukraine is suffering a dangerously large domestic surplus. Solomchuk says Ukraine needs to export at least 6 million tons per month.

Faced with this daunting task, the temporary corridor offers some hope. Deputy head of the Agrarian Council Denys Marchuk believes it could eventually export 2-2.5 million tons per month, pushing Ukraine’s overall export to 5-5.5 million tons a month.

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