Russia pulls out of Black Sea grain deal – what does this mean for ship owners?

The UN brokered grain corridor through the Black Sea to facilitate the export of Ukrainian grain has been a godsend for countries reliant on grain imports. It has also seen a regular flow of ships plying this route protected by commercially available insurance. The recent decision by Russia to pull out of the UN backed deal followed by threats to attack ships has scuppered this deal and effectively created a blockade. Most ships are now simply unable to obtain the necessary insurance to trade to Ukraine. It has also led to commercial insurers suspending the marine and war risk cover in place for Ukrainian grain shipments. The price of grain has increased by some 14% creating yet further inflationary pressure.

This situation is reminiscent of the attempts to close the Strait of Hormuz in the 1980’s and the sabre rattling that went on back in 2011 when Iran threatened to close the Strait as a response to US led sanctions against Iran. The US moved quickly to remove that threat by deploying military vessels to deter attacks on international shipping. The question here of course is what the US and NATO will do if anything in response to the end of the grain deal and the effective imposition of an illegal blockade against international shipping.

This recent development may affect ship owners committed to long term contracts to ship Ukrainian grain cargoes. Those contracts usually provide for charterers or shippers to procure and/or pay for suitable insurance cover so, absent that, there should be no obligation on the ship owner to put the ship and crew at risk. It remains to be seen if some ship owners will run the gauntlet in exchange for lucrative freights but for now it seems that Ukrainian grain shipments are effectively on hold unless the US and/or NATO are prepared to commit military assets to the region which would presumably be considered a dangerous escalation.

Nick Burgess
Nick Burgess
BDM is a specialist shipping law firm offering high quality legal advice and representation at a reasonable price. Please follow us on social media by clicking below.

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