Russia and Ukraine Are Attacking Each Other’s Ships and Ports—Grain Exports From Both Countries Are Falling

Ukraine is facing severe difficulties exporting grain through the Black Sea after Russia intensified its attacks on commercial vessels. Moscow’s strikes follow a week of heavy Ukrainian attacks on Russian shipping, the Financial Times reports.

Russian drone attacks have reduced cargo-storage capacity in Odesa, Ukraine’s largest seaport, by a third, according to maritime-security company Ambrey. Some shipowners are refusing to send vessels into the area, while some traders have suspended purchases in Odesa.

Eleven people, including port workers and foreign sailors, have been killed in dozens of attacks on ports and vessels over the past two weeks, according to Ukraine’s port authority.

“Russia has attacked ports and terminals for four consecutive days. Now vessels do not want to enter,” said Masha Belikova, a grain analyst in Dnipro. “Crew members have been wounded and killed, and that is a serious consideration for any shipowner.”

Domestic purchase prices at Ukrainian ports have effectively “disappeared,” she said, while shipowners have stopped quoting freight rates.

The Black Sea route is critical to Ukraine’s economy and the global food market. Russia and Ukraine together account for roughly a third of global wheat exports. After Moscow withdrew from the UN-backed safe-corridor initiative in 2023, Kyiv used a coastal route to restore shipments from Odesa and neighboring ports to prewar levels.

Traders are now discussing diverting some grain along the Danube and subsequently shipping it through the Romanian port of Constanța. The route was already used during the early stages of the war, Belikova noted.

Some vessels have stopped outside Ukrainian territorial waters to reassess the threat of Russian missile and drone strikes. Insurance rates have meanwhile risen sharply, said Pavlo Sosnovskyi, an analyst at the Ukrainian company International Seaborne Market.

“Several insurers have completely suspended war-risk coverage for voyages to Ukrainian ports,” he said.

Russian seaborne exports are also under strain. Shipping volumes are declining, at least partly because of threats to navigation in the Sea of Azov, where Ukraine has intensified attacks on fuel tankers and support vessels.

According to Ukrainian commander Robert Brovdi, naval drones attacked 11 Russian vessels in the Black Sea and Sea of Azov in a single night. They included five oil tankers, one liquefied-natural-gas carrier and three dry-cargo vessels.

Russia’s Transport Ministry is taking every measure “to facilitate cargo logistics amid the growing number of enemy attacks” on vessels in the Sea of Azov, Kommersant reported. According to the newspaper, the cost of war-risk insurance for Russian shipping has also risen sharply, while some companies have stopped offering such coverage for vessels in the region altogether.

Analysts have cut their forecast for Russian wheat exports in July by as much as 20%. In addition to attacks on shipping, the estimate was affected by a late harvest and Russia’s fuel crisis, Kommersant reported.

The growing risks in the Black Sea have already affected prices. The most actively traded wheat futures contract in Chicago rose to $6.95 a bushel on Thursday, reaching a two-year high. Milling wheat in Paris climbed to its highest price in 17 months.

“The market is beginning to understand that this is not the usual short-lived price spike caused by events in the Black Sea, which typically fades fairly quickly. The consequences could be more far-reaching: export estimates for both Russia and Ukraine may have to be cut substantially, leaving the outlook for global grain and wheat supplies less favorable,” said Andrey Sizov, managing director of the research firm SovEcon.

The escalation comes as the outlook for global grain supplies has begun to deteriorate following a period of relatively abundant harvests. At the same time, the war with Iran has increased the cost of fuel, fertilizer and maritime transport.