The Russian government has decided not to renew the agreement that allowed the export of cereals via maritime routes through Ukrainian ports in the Black Sea, which expired on July 17th. This agreement, sponsored by the United Nations (UN) and Turkey, was signed in July 2022 between Russia and Ukraine for an initial period of 120 days and has been subsequently extended three times.
Russian authorities already complained last April that another agreement signed with the UN, which committed the organization to assist Russia with its food and fertilizer exports, was not being fulfilled. For the Russian government, both agreements were “interconnected parts of the same package,” and they suggested that they would consider resurrecting the Black Sea agreement if demands to improve their own grain and fertilizer exports were met.
The Black Sea agreement allowed a safe corridor for bulk carriers from Ukrainian ports of Chornomorsk, Odesa, and Yuzhny to the Bosphorus. During the year it was in operation, over 32 million tons of cereal were exported, including 725,000 tons to needy countries included in the UN’s World Food Program.
Following the non-renewal, Russia notified the International Maritime Organization (IMO) that their “guarantees for the safety of navigation” had been revoked and that they would take necessary proactive actions and response measures to neutralize threats posed by the Kiev regime in the area.
The insurers’ reaction
In response to this communication, insurers are considering suspending coverage for merchant vessels sailing to Ukraine. According to Christian Vinther Christensen, COO of the Danish shipping group NORDEN, “following the agreement’s failure, most shipowners will now refrain from calling at Ukrainian ports.”
Sources in the marine insurance sector warn that some insurers will significantly increase coverage premiums, while others will stop offering any type of coverage for vessels sailing in this area, especially if Russia decides to lay mines.
Lloyd’s of London insurance market has already included the Black Sea region on its high-risk list. Neil Roberts, Head of Marine and Aviation Insurance at the Lloyd’s Market Association (LMA), which represents the interests of insurance companies in the market, explained that “annual coverage remains in effect, but trips to the listed areas will be assessed individually based on circumstances.” Additional premiums for war risk insurance, charged when entering the Black Sea area, must be renewed every seven days.
“From the insurers’ perspective, quotations for ship voyages through the Black Sea corridor expired with the end of the agreement, so a renegotiation of terms should be expected,” concluded Neil Roberts.