War for Black Sea: prospects for Ukraine's trade route in 2024

Espreso has analyzed how Ukrainians are repelling Russian aggression in the Black Sea, as well as the prospects for the functioning of Ukraine's trade route in 2024.

What the article is about:

• The Black Sea blockade: the cost to Ukraine's economy
• Confronting the Russian aggressor in the Black Sea: Ukraine restores grain corridor
• Prospects for Ukraine's trade route in 2024

The Black Sea blockade: the cost to Ukraine's economy

2022 could have become a record year for Ukraine in terms of exports in the history of independence. In January-February 2022, Ukrainian exports showed positive growth dynamics compared to the same period last year, with an increase in exports of 34%.

However, Russia's full-scale invasion and the blockade of Ukrainian seaports ate up a third of Ukraine's economy. In total, in 9 months of 2022, Ukraine exported goods worth USD 33 billion, which is 31.5% less than the volume for the same period in 2021.

In 2021, ferrous metals ranked first among export categories of goods; in 2022, they lost ground to grain crops.

Other sectors that have experienced significant export reductions in 8 months of 2022 are: chemical products - 51%, machine building - 18%, furniture - 18%, agricultural and food products - 11%, clothing and footwear - 10%.

Grains and oilseeds account for almost 79% of agricultural and food exports. Before the war, 89% of Ukraine's grain exports were shipped through Black Sea ports. In 2021, Ukraine's ports of Odesa, Chornomorsk, Pivdennyi, and Mykolaiv together handled up to 6 million tons of grain per month and were poised to set new records in 2022 thanks to investments in port infrastructure and a bumper harvest.

Even before the Russian invasion, sea routes of communication had already been partially blocked under the pretext of Russian military exercises. With the outbreak of the war, a full blockade was imposed on Ukrainian ports, and two of them, Berdyansk and Mariupol, were occupied by Russian troops.

Road and railroad transportation became the primary means of delivering grain to EU members, although this did not completely offset the negative impact of closed ports.

Ukraine lost 30% of its exports in 2022, and it seems unlikely that this loss will be made up in the near future. And while experts estimate that Ukraine's economy has already begun to recover, it will need more than USD 5 million in investment to expand export corridors and return to pre-war levels.

Confronting the Russian aggressor in the Black Sea: Ukraine restores grain corridor

Until July 17, 2023, a grain corridor operated in the Black Sea under the auspices of the UN and Turkey, but Russia unilaterally decided to withdraw from it.

It was always going to be dangerous for Ukraine to carve out its own makeshift corridor in the Black Sea in spite of Russian shelling. But for Ukraine, it was a strategic need. Its deepwater ports handled 60% of the nation's trade prior to the conflict. Cargo ships sailed from that location to markets in the Middle East and Africa. Russia engaged in economic warfare when it decided to reopen the Black Sea blockade. As a result, Ukraine started covertly creating a different path.

The goal of the Ukrainian strategy was to clear a path through the shallowest waters of the Danube. Without even a single vessel, Ukraine had to fight hard to cross its own grain corridor. The process took place in several stages.

During the initial weeks of the full-scale invasion, Ukraine successfully repelled Russian forces' seaborne assault and prevented the encirclement of Odesa in March 2022. 

Later, the Ukrainian forces managed to regain control over Zmiinyi Island by sinking the Moskva cruiser. Although the enemy ship was destroyed, Ukraine still could not guarantee the free movement of ships in the Black Sea, so new solutions to warfare were sought.

One of these solutions was naval drones, which have proven to be an effective weapon to deter the Russian aggressor. They helped Ukrainian forces paralyze the Black Sea Fleet by completely destroying or damaging such vessels as the Novocherkassk, Admiral Makarov, Ivan Golubets, Olenegorsky Gornyak, Sergey Kotov, Pavel Derzhavin, and Ivanovets.

In total, Ukraine managed to sink at least 22 of the 80 warships of the Russian Black Sea Fleet and damage another 13. Enemy warships were completely driven out of the northwest, center, and southwest regions of the Black Sea by Ukraine in 2023, and Russia withdrew its most powerful ships to the Novorossiysk naval base.

The strategy worked: the three Odesa ports shipped 6.3 million tons of goods in December, nearly reaching pre-war levels. In a little over six months, 337 vessels have transported more than 10 million tons of cargo through this corridor.

Prospects for Ukraine's trade route in 2024

Thanks to the reopening of Odesa ports, Ukraine's exports could grow by at least USD 3.3 billion in 2024, according to Ukraine's Ministry of Economy. This will add stability to the exchange rate and 1.2% to the country's GDP growth.

Merchant ships are not fully protected, as Ukraine lacks air defense, international monitoring, and foreign military escorts. However, experts predict that the Black Sea trade route will continue to function, as a number of countries are willing to help Ukraine strengthen its naval and security capabilities.

One such initiative is the Maritime Coalition of the United Kingdom and Norway. This cooperation aims to strengthen security in the Black Sea, help restore maritime facilities, preserve freedom of navigation, and protect sea transportation routes. This includes the transfer of ships, amphibious vehicles, and other equipment to the Ukrainian Navy.

Britain has already planned to give Ukraine two Royal Navy trawler ships to improve security in the Black Sea. However, due to the Montreux Convention, Turkey currently does not allow these ships to enter the Black Sea. Although, it is likely that NATO partners will be able to find a solution later. 

Another initiative is a coalition of 3 NATO states on demining. The governments of the Republic of Bulgaria, Romania, and the Republic of Turkey signed a Memorandum of Understanding on January 11 in Istanbul, Turkey, to establish the Black Sea Maritime Mine Action Group (MSM Black Sea). The group will operate mainly in the exclusive economic zones and territorial waters of the member states to eliminate mine threats.

Though not a NATO mission, the minesweeping force will be the first significant cooperative effort by the Black Sea partners since President Vladimir Putin's order to launch the war against Ukraine in February 2022.

Therefore, with the help of partner countries, Ukraine has every chance to establish safe movement of ships in the Black Sea and restore its exports to pre-war levels.