Transcript
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The host introduces the year of war in the Black Sea and explains why the commercial shipping impact matters globally. He then outlines the Black Sea’s geography and why its choke points make it strategically important.
Speaker A
On this episode of what's Going On With Shipping, war has raged on the Black Sea for a year.I am your host, Sal McCoglan, and welcome to this episode.So I got a call from the U.S. naval Institute News asking me to comment on the conflict on the Black Sea over the past year.February 24th of 2022, Russia invaded Ukraine.And since then, we've seen war waged on this sea.
And most of the comments they got obviously dealt with the military aspects, the attacks on Snake, Snake island, the sinking of the Moskva, and a few other ones that I'll recap here in a second.However, I talked about the commercial implications, and I think the commercial implications on, on shipping is the vital aspect for both Ukraine and Russia and the world in general.It is how this conflict is affecting you wherever you are on the planet.You don't have to be in Ukraine and Russia to be impacted by this war.And, and that's what we're seeing.And that has to do with the vital nature of the Black Sea.So before we jump into this, if you're new to the channel, take a moment, subscribe to the Channel, hit the bell.So you'd be alert about new videos as they come out.All right, let's go ahead and jump into this story.
So this is the geography of the Black Sea.And the Black Sea is a really unique little piece of water.It is a cul de sac off the northeast part of the Mediterranean.Massive river systems dump into this waterway.It doesn't get a lot of attention because, again, it's not one of a major thoroughfare.However, shipping does, does come in and out of the Black Sea through a very constrained choke point.
Maritime choke points exist around the world.Straits of Gibraltar, the Suez and Panama Canal, the Straits of Malacca, the southern tip of South America and South Africa.We see these everywhere, but probably one of the most famous is right down here in the Turkish Straits with the Dardanelles, which became famous during World War I.This is the Battle of Gallipoli and of course, the Bosphorus, which is the strait right here by Istanbul between Europe and Asia.And the invasion of Russia into Ukraine is not new.Let's be clear about this.This has been going on for quite a while.In 2014, you have the invasion and takeover of Crimea, this peninsula right here which gave Russia control of this vital little waterway here, the Kerch Strait.And the Kerch Strait is this bridge between the Sea of Azov and.And the Black Sea.
However, Russia did not control the northern shore of the Sea of Azov.This was under Ukrainian control.And this has been a big target for Russia during the war.This is the city of Mariupol up here.Berdansk is right here.
And one of the big things that people will talk about in this conflict is how Russia wanted to get the land bridge created a land bridge that connected Crimea to Russia through the Donbas region.I would argue the other element here that I think is even more important is they wanted to turn the Sea of Azov, this little sea right here, into a Russian lake.They wanted to make sure that the Ukrainians could not shut off this little strait right here between Mariupol and Russia, where the city of Rostov on the Don.This is the Don River.The Don river feeds into the Sea of Azov.
The Don river connects to the Volga, it connects to the Caspian Sea.It's the Mississippi river, the Yangtze river, the Rhine of, of Russia.Huge amount of trade comes out through here.And as long as Ukraine controlled the northern shore of the Sea of Azov, they could cut off Russian trade.This is one of the big features for Russia to take Crimea in 2014.You got to think about commercial here, not just military.
This chapter reviews the main military and maritime events of the conflict, including Snake Island, mine warfare, the sinking of the Moskva, and attacks on logistics targets. It also covers Turkey’s Montreux Convention restrictions and the grain export deal brokered through the Black Sea.
Speaker A
Well, the war itself goes through several iterations.I'm going to do a very brief overview of the major events on the war in the Black Sea.So initially there was a perception that Russia was going to amphibiously assault Odessa, do a D day style landing to take the major port of Odessa.And I would say people who are talking that don't study Russian naval tactics, Russians really don't have a true amphibious kick in the door assault capability.
Russian naval infantry lands typically in supporting roles, not in assaulting roles.And the idea that Russia would land this huge force deep behind the lines is really not applicable.That's not what the Russians are going to do.But the Russians did execute some operations here.And one of the most famous, of course here was the seizing of Snake Island.
Snake island, this little island off the Danube river right there at the border of Romania and Ukraine was key.This island is astride the supply line from Odessa down to Bosphorus and the Russians seize it.There was a lot of misinformation out there that the Russians killed everybody on the island.This is the island that gave the famous statement back to the Russian cruiser.But importantly, Russia did see Snake island and that put them on the mouth of the Danube river where the few remaining Ukrainian ports were that were not blocked.
And at the same time, it blocked ships coming out of Odessa.Now, I should mention that the Ukrainians, as the war was about to commence, sent out tugboats and this was seen on marine traffic and a few other sites out along their northern shore of the Gulf of Odessa, from Odessa over to Kherson and Mikalev and mine their harbors.So the Ukrainians took a defensive action here to mine their harbors to prevent the Russians from landing or using the ports.So you have Ukrainian mine operations, you have the Russians seizing Snake island and we may have Russian mining too.It's not been clear yet whether or not the Russians have laid mines outside of Ukrainian waters.Now understand, the minute you drop mines in the water, whether you're Ukraine or Russia, they're going to pop loose, they're going to break loose.And one of the things we've seen is errant mines loose mines drifting throughout the Black Sea, down to Romania, Bulgaria, Turkey, even as far as Georgia.
We've seen one wash ashore and explode.The other big next big event here is the sinking of the Moskva, the Russian cruiser, the Russian flagship of the Black Sea fleet.Now I should mention one of the other key elements here was Turkey implemented the Montreux Convention.This is the Convention of 1936 where Turkey controls the waterway between the Black Sea and the Mediterranean.And by initiating provisions of the Montreux Convention, they basically said that both Russia and Ukraine can no longer send ships, warships through the Turkish Straits unless those ships were home ported in the Black Sea initially, which basically shut the Black Sea off from any further Russian reinforcements coming their way.It also cut the Ukrainians off, although you'll see the Ukrainians found a little bit of a way around that.Singing of Moskva has been a very interesting story.I have a whole series of videos that look at each of these events in a little bit detail and I'll link them up above here for you.
You can take a look at them.But sinking of Moskva was an important issue because it forced the Russians to back out of the Gulf of Odessa.That's this region right here, this area between Sevastopol, their main Russian naval base, and Odessa, the main Ukrainian port.And basically what the Gulf of Odessa became was a no man zone almost.The Russians backed out.They would send in ships every now and then and their Kilo class submarines to launch Kalibr missiles.These are those surface to surface missiles that would strike into the interior Ukraine.And then the Ukrainians started an operation to take back Snake island from them.Bombardment attacking the supply lines.There are also a series of oil platforms that were out here that were Taken over by the Russians.They were targeted.And basically what the Ukrainians were trying to do is push the Russians back out of the Gulf of Odessa.
At the same time, the Ukrainians start developing these ports here along the Russian, excuse me, along the Ukrainian Romanian border.This is the ports that are going to be used that come out here in the Danube that are going to be used that can basically get cargo out, grain and material.The Ukrainians also modified a railway to be able to use their gauge railways to get into Romania, get down to Constana, and basically start getting grain out.And the key here is grain.Grain is going to be the big issue that we keep talking about here.So you have the.The battle for Snake island, you have the sinking in the Moskva, you have the Russians pulling back from the Black Sea, and then you have some other issues that begin to happen here.So you have the attack on this, on Berdansk.
The Russians brought in some naval supply vessels into the port of Berdansk.Very big PR they did on this to show that Russians were landing supplies here at Berdansk along the Sea of Azov.And then roughly the next day or so, one of their vessels blew up.How it blew up, we're not exactly sure.Was it the Ukrainians targeting it was a Russian accident, we don't know.
But the Russians lose one of their supply craft.And this supply craft was key because it was offloading other supply craft.This craft had cranes on it so it could offload some of the LSTs, the landing ship tanks the Russians have, they can hook up to the bow doors and stern doors.And so it was a significant loss for the Russians to lose the port of Berdansk, which helped provided supplies and logistics over the sea.We have the attack on the Kerch Strait bridge.
Whether that was a truck attack or an underwater attack by, as we'll see, these unmanned surface vessels.What's interesting is the attack on the Kerch Strait bridge didn't take place over the main span over the shipping channel, but over one of the lower spans.And that gives a little bit more credence to the idea that it may have been a surface vessel attacking, because those.Those spans over the center are really high, hard to hit at, but the lower spans are more targetable.But again, one of the big things here is going after logistics.This is the supply lines that head into the Crimean Peninsula and a good test to show whether or not the Ukrainians can hit Russian logistics.And then you have the attack on the port of Sevastopol by the unmanned surface vessels, the kamikaze kayaks.Even though there's no crews on board, they're completely remote control.
And so these attacks have been against Russian naval vessels.The port itself is Sevastopol, the main Russian naval base.
And what this has done is force the Russians to pull their naval forces back toward secondary ports, Novorovskaya and other ports along the eastern Black Sea, basically surrendering even more control of the Gulf of Odessa.And it's during this period of time that Turkey and the United nations brokered a deal between Russia and Ukraine to allow the shipment of grain out of the country of Ukraine.It was in Turkey's best interest to do this for a variety of reasons.They produce 40% of the world's flourish and they get a lot of their wheat, obviously from Ukraine and Russia.It was in Russia's best interest too, because these attacks were.
Had the potential to threaten Russian shipping coming out of Rostov on the Don and Novoriskaya out into the Black Sea.So by sitting there saying, hey, we won't attack Ukrainian ships coming out, and it's not really Ukrainian ships, it's commercial ships flying multiple flags of, of open registry flags.But if Russia doesn't attack vessels carrying Ukrainian cargo, then Ukrainians in turn shouldn't be attacking Russian or ships carrying Russian cargo.And I think that's the big issue I want to talk about here.
The speaker turns to reporting on how the war reshaped crude oil and diesel flows, with Russian exports moving away from Europe toward Asia, Africa, and other markets. He explains how sanctions, price caps, and longer routes increased ton-miles and boosted tanker demand.
Speaker A
So here's a story from USNI News that I was quoted in the other day.And again, Russia, Ukraine in a Black Sea stalemate a year into the Russia Ukraine conflict.And again, some great quotes in here by a lot of people and other than me.Yeah, my quotes are not great, but my focus was on the commercial side and that's what I want to focus on here with you.I'm going to go in a little bit more detail than it's in the article here.Now, I'm going to source a couple of sites here that I'm going to recommend.Obviously, this story is one of the first ones.The other was a great feature done by Sam chambers over at splash 247 how shipping navigated its way through 12 months of war in Ukraine.Absolutely fantastic piece that was done by Sam.I strongly recommend it.
I think it is a great summary of it.
And the other one is by Greg Miller over at Freight Waves one year later, how Ukraine, Russia, war reshaped ocean strategy.And again, a lot of great material in these sources and I strongly recommend, you'll see them down in the show notes for you to take a look at so Sam kicks off this story in a great way and I just want to read one of his opening paragraphs.Seafarers have died in the crossfire.Absolutely true.Around the Black Sea, many more have been pressed into service on the ground in Ukraine.And global shipping is braced for accidents as vintage vessels join the fast growing dark fleet, trading under the radar with worrying safety concerns.He then has a great quote from someone who I think is absolutely one of the most important people right now in global shipping, and that's Dr. Martin Stopford, identified here as the world's most famous maritime economist, which I agree his quote, it's been more of an addition to the many disruptions caused by the pandemic and its aftermath.
And there's no doubt about that.One of the things we're seeing here is this huge disruptions taking place.And Sam included some great charts I want to highlight here.So one of the first ones here is this shift in crude trade patterns, how the patterns have shifted in the shipment.And when you look at the data that he provides, it's absolutely fantastic.One of the big things is if you look at the old routes here, the old routes that were done moving crude out of the Baltic, out of the Black Sea, takes about five days out of St. Petersburg, out of the main ports in the Black Sea, to get to terminals in Northern Europe and Southern Europe.So just five days to do that.However, with the sanctions going into effect on crude oil now, all of a sudden the EU and the G7 are not accepting that.
And what we see is a big change.So now where do you get that crude oil?Well, now that crude oil is coming from the United States, from the Gulf of Mexico, from Brazil, from the west coast of Africa, from the Middle east, and it's taking much longer.You're seeing 20 days on average to ship across the Atlantic.You're seeing 25 days from the Middle east coming in versus five days.That means again, greater, what's called ton miles.You may not be changing the total tons that are coming in, but you're also increasing the miles at the same time.Where's that Russian crude oil going if it's not going to Europe?Well, it's going to Africa, it's going to India, a lot of it, and some of it's going to Asia.And that is a much longer voyage.
According to Sam in the story here, an average of 3.21 million barrels per day were loaded over the past 12 months versus an average of 3.06 million barrels per day during the previous 12 month period volumes to Europe started declined shortly after the war broke out and were already limited by the time of the 12-1-5 price cap.Just quick reminder, oil is still going to Europe, but under the price cap it has to be under a certain level to go in.The vast majority of ton mile changes related to Russian seaborne crude oil flows were therefore witnessed last year.The biggest shift was in volumes heading to Asia where an average of 1.93 million barrels per day has ended up over the past 12 months versus 1.04 million barrels per day in the previous 12 months.So you're looking at almost a doubling of the amount of oil that is heading to Asia right now.
Go down here a little further.India has been the most eager buyer, accounting for 829,000 barrels per day of what had been loaded of Russian crude oil over the past year, compared with only 31,000 barrels per day during the 12 month period.It can get oil cheaper from Russia than it can from the Middle East.China has taken a fair bit, but more more with the past year showing 994,000 barrels per day versus 700,000 loaded in Russian ports a year earlier.So you know, we keep thinking that China's consuming a good chunk of this, but in truth what we're seeing is most of it's going to Africa, it's going to India in particular is the country that seems to be consuming the most of it.
Look at some charts that were with Greg Miller's story right here.Russian crude exports versus EU crude exports from Russia.So you're seeing the amount of Russian crude exports.That's that big area in blue that you see.So you're looking at over 2.5 to 3.5 million barrels per day.
The number the crude imports to Europe are the red line there.So they were getting about 1.5 million barrels per day when the war started.So roughly about 60% of Russian crude was flowing into Europe.And you see here the decline and notice again it doesn't quite all bottom out here, but you see how much it has declined.But at the same time, look at the total amount of Russian crude oil that's coming out.You don't see really appreciable decrease in that.Remember what the price cap is doing is forcing Russia to stay in the economy.They're still shipping oil, but they are shipping it below the $60 per barrel cap that is out there for crude oil.This is EU crude oil imports.You can see how much of those crude oil imports come in from Russia.
Obviously they're getting crude imports from other countries besides Russia, but those from Russia make up a percentage of it.You can see how it decreases here over the course of the year.Next, I want to talk a little bit about diesel fuel and how diesel this is the clean product.And this is the most recent sanction that went into effect on February 5th.And very similar to what you saw in the previous chart, Russian diesel is flowing different areas.
So again, coming out of the Baltic, coming out of the Black Sea, where Russian diesel flows previously go to into Northern Europe, excuse me, into Northern Europe, Southern Europe, that's now been disrupted.And the dotted lines vice the solid line show where Russian diesel is going.This is based on information from Scorpio Tankers.So you're seeing that diesel heading to South Africa, you're seeing it heading to me, South America, you see it heading to West Africa, you see it heading to India, you see it heading to the Far East.And that new diesel flow is even expanding even more.
And so new additional diesel fuels.You're seeing America shipping a lot of diesel to Europe.The only thing I would change on this map is a lot of that diesel isn't coming out of Texas and the Gulf of Mexico.It's actually coming out of the New York area at the end of the Colonial pipeline.That's what's causing shortages in the New York area and the Mid Atlantic and New England areas.
And then you're seeing diesel coming out of Asia, out of India, out of Turkey, out of the Middle East.And some of this diesel, it should be clear, is diesel that is refined from Russian crude oil.And this diesel now is sailing a longer distance to basically get there.It comes back to that idea of ton miles.Go back to Sam's article here for a minute.
Volumes of clean oil products, predominantly diesel, gasoline and naphtha, have also been resilient at around 1.6 million barrels per day, with volumes reaching as high as 1.9 million barrels per day.Over the past two months leading up to the February 5 price cap on oil products, an average of 266,000 barrels per day have been loaded for European destination donations after the February 5 price cap, versus an average of 908,000 barrels per day.So we're seeing a big drop right there.Go on here.Europe has shifted much of its sourcing from Russia to suppliers east of Suez.
This is going to be Middle East, South Asia, East Asia.While Russian clean products now seek new homes in Asia and Africa predominantly.So you're seeing a lot of cargo that is on the move Here both in terms of dirty products and clean products.And this has been a big, huge boon, obviously, for the tanker industry.One of the things we see is the tanker industry in a big uptick.We'll talk about.Here's that chart from Greg Miller on Russian clean products exports versus European products imports from Russia.Again, go back to February of 2022.Look how much Europe was importing of Russian clean fuel products.Obviously, the overwhelming majority of it went to Europe.
And then you see the change.But again, you see that diesel really kicking up there in terms of its exports.And here a little bit more detail in that chart you're seeing.I read a quote that Greg Miller has in his story.This is from an Evercore analyst by the name of John Chappelle.
He called the war, quote, a generational geopolitical event that is likely to change seaborne flows of the world's most important commodities.For years, the redrawing of the global trade map has only entered the early innings.And I think he's exactly true.If you look at the Q4 results that just came in for tanker companies, almost every tanker company reported in the green, just absolute increases on their stocks, on their ability to do business right now because you're using a finite amount of tankers and matter of fact, I would argue a diminishing number of tankers to haul cargo over greater distances.We're going to talk a little bit more about that in a minute.
This section examines the rise of the shadow tanker fleet, the shortage of new tanker construction, and the logistical consequences of moving Russian oil through smaller ships and ship-to-ship transfers. It then shifts to grain exports, showing how Ukrainian agricultural shipments were disrupted and partially restored through the Black Sea Grain Initiative.
Speaker A
This chart was also included here.Changes to 2022 outlook following the Russia, Ukraine war.This is looking at coal flows.And so again, we're still looking at energy here.And one of the things you're seeing is where the coal is coming from.And again, another vital commodity, one of the things we've seen is Europe's requirement for energy change.When you cut Russia off from crude oil, from diesel fuel, from natural gas and from coal, it's got to come from other places.And where's Europe getting it from?Well, you see right here, it's getting it from the United States.You're getting it from Colombia, you're getting it from South Africa, from Australia, from Indonesia, where Russia is losing out, selling its coal to Europe.
It is selling it instead to countries like China, to India, but not in as large a quantity as you've seen previously.So again, I think that's a significant issue that needs a little bit more analysis of the impact.One of the big stories here.And Sam has a Great story at splash 247 on the investigation that pinpoints the true scale of what's called the Shadow tanker Fleet.There's a few of these stories out there.
There was one done by Lloyd's, a few others.Sam Story has basically the information here where he talks about the number of the fleet.I'm going to go down here to his numbers.So basically what he says here.Following weeks of work alongside industry sources, Splashes found the Shadow tanker fleet as of Monday, total421ships.
These are ships that have left traditional tanker firms and are being engaged in hauling Russian oil.A lot of these tanker firms have reflagged these vessels to very open registries.Maybe, you know, not even the mainstream open registries, but other flags.The ships are receiving their insurance not through European, Japanese, Korean or US insurance companies, but through new ones in China, India, in the Middle East.Basically what Sam has found out here and his staff for dirty tankers.This comprises 150 Aframax tankers.These are smaller tankers, 49 Suez, Max and 104 VLCCs.All three of these carry crude oil.While on the clean front, splashes counted five handy tankers, 17 LR1s, three LR2s and 93 misses.These are the ones that carry basically the clean product diesel, naphtha, all those elements, he goes on here.Further checks have also been made via the International Group of PNI Clubs online ship search function, which also uses data from inner tanko using multiple sale and purchase documents.
And Splash also compiled every vintage tanker that has changed hands over the past 12 months at high prices to undisclosed buyers, while also tracking every single ship that is loaded in Russia since sanctions both clean and dirty started in recent weeks.Matching all this information gives Splash the number of 421 active tankers above 10,000 deadweight tons.So just to give you some clarification here, these tankers are now out of basically service for going to Europe and other places.They're almost dedicated now to hauling Russian oil over those longer distances.
And this has a lot of implications for a variety of reasons.Tankers are not being scrapped now.Instead, basically, in lieu of scrapping, they're heading over to the Shadow fleet.There's also an issue that we'll talk about with tankers not being built.And so we have a finite number of ships in this fleet.And as more ships go to this longer trade, there are fewer vessels available to handle the routine trade, which means that charter costs and rates for tankers are increasing.Hence the big profits we just saw posted by the major tanker firms on the fourth quarter.This style of moving Russian oil requires them to Haul in smaller tankers out of the Baltic, out of the Black Sea because of draft restrictions and then conduct these ship to ship transfers in areas of Northern Europe and Southern Europe.So you see stories like this proliferating.
This one's from G Captain Bay off southern Greece becomes cog in Russian oil supply chain.
You know, how well are these tankers being monitored?Are they following all the regulations required?Marpol this is the international laws for basically ensuring environmental spills and cleanup.Are they following that?There's a big effort right now to get Russia kicked off key members or key committees in the International Maritime Organization.But the IMO is really limited in its ability and it's showing here with the growth of the shadow fleet.Add to it you've got shipping hedge funds saying that the industry is set for another boom year.So a lot of people are throwing money into this industry and investing in it.It.This is from the review of Maritime Transport.This is the most recent one, the 2022 that came out in November.And this shows you ship construction over the past 10 years.And notice the fact that oil tankers have decreased in terms of production.
We are not building enough oil tankers.We're not building enough oil tankers for the foreign trade.We're not building enough in the United States for the domestic trade.For example, the number of Jones act crude carriers that, that carry crude oil from Alaska to the west coast are going to age out soon and there's no replacements on track for them.Which means that Alaskan crude oil is going to have to be shipped overseas, not to the United States.Same thing for coastal trade.And what we're seeing is a reduction in total tankers around the world.This is a common occurrence.The other area that both Greg Miller at Freight Waves and Sam Chambers talk about is the grain trademark and the grain trade.The bulk trade is really important to have the context here because this is after all one of the key issues that we're seeing going on.
There's another trade that I'm not going to get in much detail about because I've talked about a lot and that's liquefied natural gas.There's.There's a lot going on with that and I've got a couple other videos that cover that.But in terms of the dry bulk trade, one of the things you're seeing here is what the loss of Ukrainian wheat and corn exports had across the board.This quote in Greg Miller's story from Petros Pappas, the CEO of Starbuck and what he says is that Global grain trade declined 3.1% last year as the war abruptly halted Ukrainian exports which accounted for 10% of the total grain trade for six months.From August onward, exports partially resumed through the Black Sea Grain Initiative.This is a chart from the Department of Agriculture that they put out in January and they say as a result of the Black Sea Grain Initiative.
What we're seeing here is Ukraine's combined wheat and corn exports in September and October were higher than the five year average with December volumes on par with average.So you can see where that restricted port availability came in.From March all the way through August, you see the amount of wheat and corn that was coming out, what the average was coming out.You can see it precipitously declines.Usually you're seeing about 6 million tons of cargo come out of Ukraine during that period.
You're obviously not seeing it then.But what you are seeing is it pick up a bit here later on.However, you have to ask the question, how is Ukraine poised to put crops into the field?Did they get winter wheat, did they get spring crops into the field?Or is Ukraine so engrossed in war its manpower is fighting, its equipment isn't available, the fields may have anti personnel weapons, bombs, mines, who knows?
Will Ukraine be able to produce the same amount of crops it has in past years?And you have this story from Reuters the other day.The grains exports push to boost dry bulk shipping market and one of the things is Ukrainian grain is being impacted by world grain.Bumper soybean harvest in Brazil and unsold grain stocks in the US are set to boost dry bulk shipping rates as buyers, including China restock after supply shocks last year.The dry bulk shipping market has been hit in recent months by slow activity, partly driven by the COVID lockdowns in China, one of the world's biggest generators of seaborne commodity trade, including grains as well as coal and iron ore.
Grain supplies were also affected by the war in Ukraine for part of the last year until a U.S. united nations back corridor was set up.Although exports have slowed of late.And if you go on here, if you really want to get the data, head on over to the United nations site, the Black Sea Grain Initiative.It has all that information.I personally on Twitter follow an account exit266.
She has a great site.She takes all the data daily and puts it together into these tables and charts so that you can see it graphically right here.So for example, the chart down here, the map down here shows you which countries are receiving the most amount of grain.China, Spain, are The two biggest receivers by them.Turkey is not far behind them in it.You can see the metric tons overall of what's being shipped.A lot of corn is the majority, followed by wheat.And you can get a good kind of statistical breakdown here from itzit266 on Twitter.A great follow.
The final chapter covers war-risk insurance, stranded vessels, and the broader human cost for seafarers trapped by the conflict. The speaker closes by arguing that the war is becoming an economic attrition struggle and warns that attacks on neutral shipping could escalate the conflict further.
Speaker A
Then you have other issues that are playing out here that have really come to the surface with the one year anniversary.So this story by Reuters at GCapped in Ukraine to set up $500 million insurance fund for ships entering ports.There was a danger recently that ships were going to stop coming into Ukraine because they could not get war risk insurance.Even though you have insurance on a ship ship, that insurance may not cover damage to the vessel due to war mines attacks.And so shipping, shipping firms were going to stop sailing to Ukraine because they could not get the war risk insurance.Well, Ukraine is setting up this fund to cover losses for the vessels.Many of the ships that they have coming in are well below this in terms of costs.So this should be able to cover any sort of war risk.
So Ukraine's basically self insuring vessels heading into their waters.Add this story, insurers count the cost of ships caught in Ukraine crisis.So there are about 60 vessels that have not been able to get out of Ukraine.
And there's a question whether they become total constructive losses.And those losses will of course impact.Remember, the only ships that are allowed to go in and out of Ukraine right now are bulk carriers and some tankers bringing out some material, but containers, container ships, ships are not allowed to come in.There was an interesting aspect of Greg Miller's story talking about container shipping.One of the big stories in terms of container shipping was how so many firms self sanctioned against Russia.
However, one of the things that Greg unearthed is that some of those firms are not exactly doing that.Mediterranean Shipping Company, for example, is still servicing Russia even though they said they wouldn't.And so again, when it's in a company's best interest, they're going to do what's best for them economically.This story is another great one.I had this in my weekly what the Ship Shipping Industry Steps Up Calls to Free Seafarers Still Trapped by Russia's war.
About 600 seafarers are stuck on their vessels, have not been able to get off or be repatriated either by the shipping companies or because they can't get out of Ukraine.And this story is one that really needs a bit more attention.In my opinion, the International Maritime Organization is not doing enough to get these ships and their crews out of this war zone.And that kind of brings us back to where we started from with this story that I commented on for USNI News.So a little bit more detail.
It's very easy to sit there, based on my opening, and sit there and say, russia's losing this war on the Black Sea.You've lost the Moskva.You've had attacks on your major ports.Sevastopol, you had the attack on logistics at Berdansk.You lost Snake Island.The Kurt Strait Bridge has been hit.It very quick and easy to sit there and say, Russia, naval power is losing.However, commercially, it's a whole different aspect.Russia has been able to maintain the flow of food, fuel and fertilizer out of its country, even though it's not selling them to Europe anymore, it's selling them on the international market to India, to China, to Africa, to South America.And while they may not be making as much as they had been in the past, they're still generating revenue.
And that the real beneficiaries here are shipping companies, especially Greek shipping companies are making a huge amount of money here because of the added rates to charge to haul this cargo over a long distance.And this is where I kind of get into the quote of the story.And it's really the one, one of the major quotes that Heather put in her story that I said I'm teaching right now on the First World War in my Western Civilization class, my, my freshman seminar class.And I, I gave this, this quote.And, and I don't like to quote myself.I'm going to read what I said because again, it was a good quote.I like my quote.So I'll say it.When you get into an attrition style of war like this, it's sometimes not one on the battlefront, but it's on the home front.And how long can the economies withstand that?
I think we are in the grind right now of this war.And it gets into a war of attrition.Russia is the bigger country in terms of manpower, in terms of equipment, you name it.Ukraine has the backing of NATO and a lot of other nations around the world.But it really gets into economics.
If Ukraine cannot maintain its exports of grain, if the Ukrainian economy collapses, will that force them to go to the table and negotiate because their basic country is falling apart economically.This is what we see happen a lot.Unless you win that first upfront military attempt, which is what Russia tried to.The attempt to drive on Kyiv at the very beginning of the war.They tried to win their Schlieffen Plan of World War I. I keep having World War I analogies with this conflict that failed and so now they're in the Western front trench style fighting and it becomes an economic war.
And right now Ukraine and Russia are moving goods through the Black Sea.The thing I fear.So if you want to look to the second year of war on the Black Sea, what I fear is the Ukrainians will up their game on these drone unmanned attacks and they may start targeting this shadow fleet, these Russian vessels that are hauling oil, diesel, grain, fertilizer.And if the Ukrainians start hitting Russian ships or ships hauling Russian cargo, they may not be Russian owned or Russian flagged, but these vessels, what's going to stop Russia from targeting Ukrainian ships again, not Ukrainian flagships, but ships carrying Ukrainian cargo.And then the Black Sea becomes the Persian Gulf, the 1980s when Iran and Iraq started targeting neutral ships because they were going in and out of their country hauling oil.
That's the danger of this war escalating.I hope you enjoyed today's episode.If you did.Hey, take a moment.Subscribe to the channel.Hit the bell.So be alert about new videos as they come out.Leave a comment, share it across social media, give it a thumbs up and if you can support the page.How do you do that?Well, you can go to that super thanks button below and give directly to the page page or head on over to Patreon.You'll see a link to it at the end of the video or down in the show notes and you can become a monthly or yearly subscriber.I appreciate my Patreons patrons, I should say immensely.Everybody who gives super thanks.Thank you.I try to thank everybody.It's a one person operation here.I don't even have my assistants today, so the dogs aren't even in here today.
But usually it's just me and so I try to keep this channel up and running to the best of my abilities.So until our next video, this is Sal signing off.