Baltic States Urge EU To Ban Russian Grain Transit As Black Sea Shipments Fall

Estonia, Latvia and Lithuania have asked the European Union to ban the transit of Russian grain through the bloc. The move comes as Russia ships more grain through Baltic ports following a sharp fall in shipments from its Black Sea ports after Ukrainian attacks.

The three countries want to stop Russian grain from passing through EU ports and transport routes on its way to other markets. They have sent a joint letter to European Council President António Costa and European Commission President Ursula von der Leyen asking for a common ban across the EU.

However, the proposal has not been approved. Russia can still export grain directly from its own ports.

The Baltic countries say Russia is attacking Ukrainian ports, merchant ships and transport infrastructure while looking for other routes for its own grain exports.

Estonian Prime Minister Kristen Michal is expected to raise the issue at next week’s European Council meeting, according to the Estonian government.

Grain shipments from Russian Baltic and continental ports rose to 1.16 million tonnes in September, up from 216,000 tonnes in August, according to shipping broker IFCHOR Galbraiths.

Ust-Luga handled 545,000 tonnes, while Vysotsk handled another 374,000 tonnes.

At the same time, grain shipments from Russian Black Sea and Azov ports fell from 1.39 million tonnes in August to 201,000 tonnes in September.

As a result, the Baltic’s share of combined shipments from these regions rose from 12.6% to 80.7% in one month.

IFCHOR Galbraiths said Russia had supported the shift by subsidising rail transport and converting fertiliser and other bulk terminals to handle grain.

Murmansk is also preparing to receive its first grain cargoes in October. However, there are still questions about whether the port has the infrastructure needed to handle these shipments and whether using it will be cost-effective.

Despite the increase in Baltic shipments, Russia’s total monitored grain loadings across the Black Sea and Azov, Baltic and continental ports, and the Far East fell by 16% in September compared with August.

The broker said transport problems and higher costs were making it difficult for other routes to replace the lost Black Sea shipments.

Baltic wheat exports could rise again in October. Estimates from IKAR, cited by the broker, put the possible volume at 1.8 million tonnes, up from around 1.4 million tonnes in September. The final figure will depend on weather conditions and the capacity of the region’s infrastructure.

Estonia has already approved a ban on the transit of Russian and Belarusian grain through its ports. The restrictions cover products listed under the CN 10 commodity group.

Latvia tightened checks on grain origins at its ports in September after more interest in routing Russian shipments through the country. It has also been preparing measures against cargo suspected of coming from occupied Ukrainian territory.

Estonia, Latvia and Lithuania now want the EU to introduce common rules rather than leave each country to take separate action.

Their proposal also calls for stronger EU-Ukraine Solidarity Lanes and measures to stop grain from occupied Ukrainian territory from reaching international markets through European infrastructure.

Lithuanian Prime Minister Mindaugas Sinkevicius proposed the transit ban on Thursday. He also called for sanctions against Russian agricultural oligarchs who support the war in Ukraine.

The Russian embassy in Estonia said in an emailed statement that decisions made by the Estonian government often raise questions in business circles and among society.

Moving grain from Russian Baltic ports to Egypt costs around 30% to 35% more per tonne than shipping it from traditional Russian Black Sea ports, according to IFCHOR Galbraiths. The estimate is based on freight rates before the latest escalation.

Russia has tried to reduce these extra costs through rail subsidies, temporary export-duty relief and priority access for grain on busy northern rail routes.

Longer journeys from Baltic ports to North African and Mediterranean markets could increase demand for geared bulk carriers. However, the extra shipments have not made up for the fall in Black Sea volumes.

An EU-wide ban would not stop Russian grain from being shipped directly from ports such as Ust-Luga and Vysotsk. It would prevent Russia from using European ports and transport routes as alternative gateways for its grain exports.

Attacks On Merchant Ships

The proposed ban comes as attacks on merchant ships and higher insurance costs create further problems for shipping in the Black Sea region.

IFCHOR Galbraiths reported that several merchant vessels were hit in the exclusive economic zones of Romania and Bulgaria in early October. The attacks took place beyond areas traditionally considered to carry the highest war risk.

The Joint War Committee had already expanded its Black Sea Listed Area in September.

Reported war-risk insurance premiums rose from around 0.1% to 0.5% of a vessel’s value over the two weeks covered by the broker’s assessment. Some market participants have warned that premiums could approach 1% if the situation worsens.

Romanian and Bulgarian ports, including Constanta, Varna and Burgas, as well as the Danube, have become important routes for Ukrainian agricultural exports.

If war-risk requirements are extended to waters currently outside the relevant areas, shipping and insurance costs could rise further. Shipowners may also become less willing to accept cargoes in the region.

References: Reuters, Traders Union