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Shipping and Ukraine: Repercussions of a crisis

The leadership of our industry is right to demand that seafarers from non-belligerent countries get home. Meanwhile, shipping must buckle down for what increasingly looks like a long-term war

Next week sees the first anniversary of the Russian invasion. There should be no second anniversary

GIVEN the regularity with which Western politicians rock up in Kyiv to avail themselves of photo opportunities with president Zelenskyy, it is obviously possible to both enter and exit the war-torn country.

This being the case, there is no compelling reason to leave 331 seafarers of all nationalities on board the 70 or so ships trapped in Ukrainian ports since the brutal Russian invasion last February.

Their plight will be highlighted in an open letter from 30 leading shipping organisations and companies to United Nations general secretary Antonio Guterres, due for publication on Monday, and rightly so.

It is difficult to think of any other industry in which the involuntary detention of so many wage-earning men and women for such an extended period would not be making headline news as a hostage crisis.

The vessels, of course, do require minimum crewing levels for their safe maintenance.

But Ukraine is a major shipping labour supply country. Personnel for this specific task could be recruited locally, allowing seafarers from the rest of the world to return home to their loved ones.

The onus now is to move beyond statements of the morally bleeding obvious and actively arrange for the repatriation of crews from non-belligerent nations. If this requires some amount of diplomatic facilitation, the UN should provide it.

The first anniversary of Putin’s tanks rolling across the Ukraine border does not fall until Friday next week. But the repercussions of the crisis have dominated recent headlines in Lloyd’s List.

It is impossible to know how long hostilities will last, although the consensus prognosis currently predicts war for months and perhaps years to come.

The resultant complications, especially bulker and tanker owners engaged in the substantial Ukrainian grain and Russian oil trades, are a big concern in shipping circles.

Surprisingly extensive activity is still possible, albeit within constraints dictated by politics. Sadly, the base case scenario is that such restrictions will stay in place indefinitely.

The grain corridor initiative brokered by Türkiye has proven its value in allowing supplies of Ukrainian grain to reach key markets in the developing world.

This has averted a widespread food crisis for millions of people in key emerging economies. On humanitarian grounds alone, it is essential that the grain keeps moving, whatever the vicissitudes of the battlefield.

Russia has developed multiple workarounds to mitigate the impact of EU and US sanctions directed against its crude and products exports, to the degree at which their very efficacy comes into question.

So long as Russia controls substantial tonnage and can find willing buyers in India, China and elsewhere, sales will continue whether Brussels and Washington like it or not.

Some efforts are being made to make the stipulations stick. The EU is considering proposals from the Netherlands to sanction Dubai-based Sun Ship Management, the operations arm of Russian tanker giant Sovcomflot.

Four of Sun’s 92-strong tanker fleet are flagged with Cyprus, although the Cypriot government has indicated that at least three will be deleted from the register sooner rather than later.

The remainder are largely flagged with Liberia and Panama, which are not jurisdictions subject to EU stipulations.

Some European tanker operators are finding legal ways to take Russian bookings, presumably incentivised by the premium charter rates on offer.

Three vessels associated with Greece’s Minerva Marine have been identified as loading price cap-compliant cargoes in Primorsk, Ust-Luga and St Petersburg.

Casualties — and for clarity, we use the word in the shipping rather than the military sense — have so far been limited.

The most obvious exception to date has been Bangladesh Shipping Corporation’s bulk carrier Banglar Samriddhi (IMO: 9793832), destroyed by a missile strike last March, killing third-engineer Hadisur Rahman.

The war risk insurance market, it was earlier feared, faced the prospect of a $1bn payout as dozens of constructive total loss claims simultaneously fell due as a result of owners being deprived of use of vessels for 12 months.

That now looks as if the worst won’t come to the worst. The eventual payout still cannot be predicted with any meaningful precision, but the best guess is that it will come in at the $400m to $500m mark.

While this represents the biggest single event in the history of war risk insurance, the insurance industry exists to meet valid claims, and is so well capitalised that it will barely notice the hit.

As the time-honoured truism attests, wars end only in either victory for one side or a peace treaty. Neither seems an immediate prospect in Ukraine, where justice surely rests with the victims of the Kremlin’s aggression.

You have just read an editorial summarising the way things stand on the anniversary of conflict that should not be happening. We sincerely hope a similar editorial will not be necessary in February 2024.

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