In times of war, the threats to merchant shipping are grave; At this point, anything can happen in the Black Sea. Russia’s oil exports by sea may also be at risk.
Russia has wasted no time in escalating tensions since it withdrew from the Black Sea Grain Initiative on July 17. Clearly, the withdrawal from the grain deal and the immediate threat to ships bound for Ukrainian Black Sea ports are part of a calculated Russian strategy to intensify pressure on Ukraine as the war drags on.
Restricting Ukraine’s access to Black Sea ports to prevent it from obtaining wheat, corn, barley and sunflower seeds from world markets is a logical wartime strategy. Russia wants to deny Ukraine the opportunity to earn foreign exchange from export earnings, and perhaps more importantly, the Russians are trying to harm Ukraine’s agricultural markets by disrupting the logistical cycle of plant harvesting and export that allows Ukraine to be a global power in agricultural export markets. Ukraine is the largest exporter of corn from the Black Sea, the largest exporter of sunflower seeds from the Black Sea and the second largest exporter of wheat from the Black Sea.
For the current crop year, Ukraine is actually the third largest corn exporter in the world and the fifth largest exporter of wheat in the world. It is therefore not surprising that the news of Russia’s exit from the grain agreement had an impact on global grain prices.
But Russia is the largest exporter of wheat from Ukraine. Russia is the undisputed king of global wheat exports, shipping nearly three times as much wheat as Ukraine via the Black Sea.
Wheat has been in the headlines lately, but we often forget that Russia is the second largest exporter of crude oil in the world, after Saudi Arabia. If refined petroleum products (gasoline, diesel, diesel, etc.) are included, then Russia is the largest supplier of petroleum (and petroleum products) to world export markets; Just under half of these exports are carried by tankers transiting the Black Sea.
It doesn’t take much effort to understand the risks that shipping disruptions in the Black Sea pose to global oil markets. By issuing a stern warning on July 19, 2023 that any ship flying the Ukrainian flag heading to Black Sea ports would be deemed to be carrying war supplies, Russia has literally declared war on ships bound for Ukraine. Ukraine responded with a letter in kind, warning that from Friday 21 July 2023 ships heading to Russian-controlled Black Sea ports could also be targeted. The White House also joined the fray by announcing that it suspected Russia of planning a “false flag” operation that would attack civilian ships while blaming Ukraine for the incident.
It’s all just talk, but the war is real, Russia is ruthless, and Ukraine is rather desperate right now, at least in terms of its ability to export products across the Black Sea. If a tanker is targeted, or even if Black Sea freight rates and insurance coverage continue to rise or become completely economically unviable, it will eventually affect global oil prices, which in turn will have a direct impact on the global economy. Don’t be surprised if the next move is global oil prices that will rise, at least temporarily, due to rising tensions in the Black Sea.
Translated article from the American magazine Forbes – Author: Sal Gilberti
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