The War's Center of Gravity - The Black Sea and Money
Control of the Black Sea, Ukrainian Agricultural Exports,
Dear BWR Subscribers,
“Barbershop Whispers….Russia” begins with “My Takeaways” on the main topic, followed by the main topic discussion. The last two sections of “Barbershop Whispers…Russia” are “Follow-ups” regarding previous publications and “Quick Bites” briefly addressing emerging events.
In last week’s BWR, I discussed the state of the war and Western political will to support Ukraine is a growing problem. Western messaging to constituents about the benefits of aid to Ukraine. How does this translate at the kitchen table?
In this week’s BWR, I will discuss the strategic importance of the Black Sea – Ukrainian agricultural exports via, and the Russian navy’s weakened presence in, the Black Sea.
Takeaways:
BATTLEFIELD: Ukrainian navy drone attacks on Russian-occupied Crimean ports have forced the Russian Black Sea Fleet into retreat and taking refuge on the easternmost shores of the Black Sea. The Kremlin’s attempt to control the Black Sea has failed.
ECONOMICS: Since Russia’s withdrawal from the Black Sea Grain Initiative (BSGI), Ukraine has exported nearly 13MMT of grains and other agricultural products via the Black Sea. Putin’s attempt to deprive Ukraine of export revenues has failed. The Solidarity Lanes (land, rail, and Danube River) and the Ukrainian Black Sea Humanitarian Corridor demonstrate reliable export channel success for Ukraine’s agricultural sector.
In August 2023, shortly after Russia withdrew from the UN-Turkish brokered Black Sea Grain Initiative (BSGI) – Incentives & Influence), Ukraine set up the ‘Black Sea humanitarian corridor’ (HC), hugging the Black Sea coastlines of Ukraine, Bulgaria, and Romania.
As per U.S. Ambassador to Ukraine Bridget Brink:
“…More than 400 ships and 13MMT (million metric tonnes) have passed through the Black Sea Humanitarian Corridor since August. This is a significant achievement as Ukraine continues to feed the world.”
In addition to the Black Sea HC, successfully protected by the Ukrainian Navy, Ukrainian goods are also being exported to markets in Europe, Asia, and Africa via the “Solidarity Lanes” – East European land, rail, and the Danube River corridor. Per Spike Brokers, an estimated 1.5MMT were exported via the Solidarity Lanes in December 2023.
Apart from feeding the world, as highlighted by US Ambassador Brink, an equally important consequence of the Black Sea HC route is the economic relief it provides to the Ukrainian agricultural industry – by securing traditional access to markets – the Ukrainian government, and the economy. According to the Ukrainian Grain Association (UGA), the agricultural sector has lost more than $25B since the start of the second invasion. In addition, before Russia’s second invasion of Ukraine, approximately 6MMT of grains and other agricultural products were shipped out through the Black Sea.
In December 2023, Ukraine shipped approximately 4.8MMT grains and other agricultural products from its Black Sea ports, more than any monthly volume achieved under the dead UN-Turkish brokered BSGI.
The Black Sea HC also provides access to markets for Ukraine’s struggling steel industry. This sector has seen factories flattened – Mariupol, once the biggest steel factory in Ukraine – is an example.
However, challenges to Ukraine’s export routes remain. First, nearly a third of the Black Sea exports (corn) are destined for China and, therefore, must transit through the Red Sea, a corridor currently subject to attacks by Iran-backed Houthis. This puts additional pricing pressures on premium insurance rates for cargo out of the Black Sea.
Solidarity Lanes faces political challenges from powerful farmer groups concerned about less expensive Ukrainian products' impact on sales. Since June 2022, the EU has suspended import tariffs on Ukrainian grains, which has sparked protests by governments, farmers, and truckers in neighboring countries such as Poland and Hungary.
Lastly, the Black Sea HC is working because the Ukrainian Navy has been able to force the Russian Black Sea fleet out of Crimea by attacking and destroying warships in port in Crimea.
These attacks by the Ukrainian armed forces have forced the Russian navy fleet to take safety on the easternmost shores of the Black Sea, rendering them ineffective and unable to disrupt Ukrainian exports. According to Western military estimates, the Ukrainian Navy has destroyed nearly 20% of the Black Sea Fleet’s equipment. This is undoubtedly a well-earned win for Ukraine’s military, albeit it remains dependent on Western financial and military aid.
In an interview with the Economist, Ukrainian President Zelensky stated that Crimea and the Black Sea would become the focus of Ukrainian forces.
“Isolating Crimea and degrading Russia’s military forces there is extremely important…it’s the way for us to reduce the number of attacks from that region…”
It seems like Crimea and the Black Sea have been the focus since mid-2023, as evidenced by continuous drone strikes on Russian warships in the Black Sea, not only Crimea, and attacks on the Kerch bridge, the main supply channel to Crimea and source of attacks on Ukraine.
Russia and Ukraine depend on the Black Sea route for agricultural exports, supplying billions in revenue to their respective economies.
Control of the Black Sea, because of its strategic military and economic importance, has been an elusive Kremlin goal for some time. Control means securing the land corridor to Crimea, security of the Kerch Bridge, and control of Ukrainian exports through the Black Sea. The Ukrainian navy has effectively thwarted Russia’s control of the Back Sea. The deployment of aero and seaborne drones and defense of the southern front, including Odessa, has been critical.
Follow-ups & Quick Bites:
Follow-ups:
EU Approves €50B Ukraine Funding Until 2027
“We have a deal,” European Council President Charles Michel announced on his X account.
The funding is separate from the military aid the EU and its member states provide Ukraine. It is intended for social programs, government salaries, and to free up state funds.
Meanwhile, a dysfunctional Republican party obstructs in Congress the $50B aid to Ukraine, and Tucker Carlson, the alt-right talking head and Trump’s future ambassador to Russia, is in Moscow for consultations with Putin.
Quick Bites
Reach Out and Touch Someone - Volgograd Refinery in Flames
This past week, two Ukrainian drones lit up the largest oil refinery in southern Russia.
The Lukoil refinery in Volgograd is more than 600 km from the front lines. Again, Ukraine strikes energy infrastructure deep inside Russia.
Vol 2, No 07 - BWR 04.02.2024
Thank you for reading “Barbershop Whispers....Russia” written by Adam A Blanco! “Barbershop Whispers…Russia” is a product of e8Q Technologies, a consultancy with insights on all things Eurasia. Subscribe for free to receive new posts.