Russia is increasingly forced to rely on the shadow fleet for grain exports, which mainly consists of old grain carriers from Türkiye and China.

Source: Reuters, reported by liga.net 

Details: The absence of ships in Russia and the reduction of Western grain traders' activities in the aggressor country increase the cost of transporting Russian wheat.

Despite this, Russia is going to export close to record volumes of grain. However, Russia's existing fleet of grain ships is far below the required capacity.

Quote from Reuters: "The situation is raising doubts about whether Russia can keep up a record pace of exports and if not resolved could push global wheat prices higher, the sources said."

More details: Russia was not happy with the grain deal, partially because Russian food exporters had difficulties working with Western companies – shipowners, insurers and banks. Companies often refused to work with Russia, and Moscow called such actions "hidden sanctions".

At least three major shipowners have refused to support any contact with Russia since February 2022. According to insurers, Russian terminals and ports often fail to pass the test of no connection with sanctioned persons. Even fueling a vessel up in Russia can be a violation of the West's sanctions.

Last year, Russia exported a record amount of wheat on ships chartered from international shipowners and traders. However, as of 1 July 2023, major traders such as Louis Dreyfus, Viterra and Cargill stopped working with Russia.

Therefore, Russia started chartering vessels from small shipowners not affiliated with these traders. In July, the Shipfix platform reported a 40% increase in Russian applications for such vessels (to 257 units).

The disruption of the Black Sea Grain Initiative, attacks on Ukrainian sea and Danube ports and a surface vessel attack on a Russian military vessel near Novorossiysk, a major oil and grain port in Russia, caused a sharp rise in insurance premiums for the transport of Russian grain. Reuters said that these additional premiums amount to tens of thousands of dollars every day.

Shipowners who still agree to work with Russian Black Sea ports have also sharply increased their prices. As one of Reuters' sources stated, the price for transporting Russian cargo is US$10,000 more per day than for the same cargo from ports in Bulgaria and Romania. 

In December 2022, the Russian government announced a plan to build a fleet of 61 new grain vessels, citing "sanctions pressure and the refusal of many international carriers to cooperate with Russia." However, no orders have yet been placed.

Russia currently has 31 grain carriers. Most of them are old and small, so in the near future, the country will have to charter foreign vessels from those who agree to work with it.

Background: 

• The "shadow fleet" of tankers that emerged to ensure the transportation of Russian oil has been reduced tenfold.
• Earlier, it was reported that the Russian "shadow fleet" of tankers transporting sanctioned oil around the world is getting younger, countering the months-long trend of using the oldest and most dangerous vessels in the world.

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