On July 22, Ukraine, Turkey, and UN Secretary General Antonio Guterres signed the Initiative (Agreement) on the partial unblocking of Ukrainian ports. This is one of the most important steps for the partial recovery of the Ukrainian economy and supply chains.
The purpose of this Initiative is to facilitate safe navigation for the export of grain and related food products and fertilizers, including ammonia, from the ports of Odesa, Chornomorsk and Yuzhny, often referred to as the “ports of Big Odesa”.
The starting point for launching the “safe corridor” mechanism is the establishment of the Joint Coordination Center (JCC) in Istanbul. Merchant vessels will have to be pre-registered with the SCC and will be subject to inspection by an inspection team in ports designated by the Turkish side.
It is important to note that we are talking about a “maritime humanitarian corridor that will be controlled remotely by the Parties” – that is, the presence of no warships is allowed. Likewise, this applies to demining, which will not be carried out, except in those cases where it is necessary for the passage of ships through the corridor.
This Agreement will remain valid for 120 days with further extension.
From an economic point of view, such Agreement will allow Ukraine to export approximately 20 million tons of grain and oil crops that are waiting to be shipped, free up space for storing the new harvest and attract foreign currency income. For comparison, in June it was possible to export only about 1/3 of the planned grain. At the same time, the humanitarian aspect will involve the arrival of necessary food to Africa, Asia and Europe.
The next point to consider (especially for Shipowners) is the insurance policy and additional war risks, because even before signing the Agreement, the Insurers unanimously stated that they need additional guarantees in connection with potential losses that may occur. Therefore, it is now expected that the underwriters will work out the signed Agreement in detail. Today, insurance premiums are quite high, but the demand for ship calls to Ukrainian ports can overcome this factor as well.
Shipowners, whose ships have been “stuck” in Ukraine since February 24, are primarily interested in unblocking Ukrainian ports, and these are about 80 merchant ships, which will be the first to pass through the “maritime humanitarian corridor”. Other shipowners will carefully consider all the risks of entering Ukrainian ports, including the Turkish fleet, which is more determined. The decision to charter a vessel for voyages to Ukrainian ports will be influenced by the freight rate, payment of insurance premiums for war risks and potential military threats in the Black Sea.
Finally, the unblocking of Ukrainian ports, even if it is only partial, foresees both fundamentally positive changes for the state’s economy and carries potential risks, given the “good faith” of russia’s fulfillment of its obligations under the Agreement.
The Ukrainian shipping community did not even have time to analyze all the pros and cons of such an unblocking scenario, as on July 23, Russia attacked the territory of the port of Odessa with a missile strike, then launched missile strikes on the Odesa region. Despite this, the ports are actively preparing for the first caravans from the ports indicated above, all other market participants are waiting for the results of the passages and the further development of this situation.
Senior partner Black Sea Law Company