Ukraine's fragile plan to ship grain across the Danube

Russia's suspension of the Black Sea Grain Deal has forced Ukraine to step up shipments of its agricultural products via alternative routes.

A cargo ship on the Sulina Canal prepares to enter the Danube River in Romania.

According to the French newspaper Le Monde, ports built along the famous European river allow the transportation of some Ukrainian grains and wheat without being subject to Russian control.

Moscow’s refusal to extend the Black Sea grain deal came as no surprise to Ukrainians. In Budjak, in Bessarabia in southwestern Ukraine, a landlocked region between Moldova, Romania and the Black Sea, residents have grown accustomed to seeing tens of thousands of trucks carrying corn, wheat and sunflower oil pass through since the conflict began in February 2022.

For months, Izmail, a small port town on the Danube, has been an alternative export hub to the larger Black Sea ports. Shipments of grain arrive by truck, are loaded onto barges and taken down the river to the Romanian port of Constanta, where they are then loaded onto a large ship.

“Izmail used to be known as a dead end,” said a cheese seller in the town’s market. “Now all this grain trading has opened up the world to us.”

Pushed into the middle of Russia’s conflict with Ukraine, Bulgarian and Moldovan cheese sellers have their own geopolitical radars on. “The roads in Izmail are full of potholes from the constant comings and goings of trucks heading to the town’s grain depots,” worries one. “If there are too many trucks here, it means there is no other way to export wheat. And that is not a good sign.”

While they hope to see a full reopening of the Black Sea ports where most of Ukraine’s grain was shipped before the conflict, producers and traders are increasingly turning to smaller ports on the Danube River along the Romanian border. Part of the harvest can now flow through the canal without the risk of Russian controls that ships must follow under the grain deal.

One of the first to grasp the value of the river route was Oleksiy Vadatursky, founder of Ukraine’s leading grain group Nibulon, based in Mykolaiv, which exports 30% of Ukraine’s grain. In May 2022, with the city under bombardment and its grain terminal blockaded, Mr. Vadatursky traveled to Izmail to launch construction of a replacement terminal. It will never be able to match the massive capacity of the Black Sea ports, but it is an effort to avoid being destroyed by the conflict. Not to mention that Ukraine is a major competitor to Russia’s agricultural sector.

Ukrainian transport officials say Ukraine’s export volumes could increase if the Bystre Canal on the Danube River is deepened. Last month, a senior Ukrainian official said Kiev wanted to start work on deepening the canal as early as this year.

Ukrainian Prime Minister Denys Shmyhal said he told his Romanian counterpart that the two countries could triple the transit of agricultural products "through the development of border crossing points, ferry terminals and sea and river ports".

However, a heatwave spreading across southern Europe is lowering the water level of the Danube River, making it more difficult to transport grain.

Overland routes are also challenged by the fact that Eastern European countries continue to deny flows from Ukraine to protect the livelihoods of local farmers.

The volume of grain shipped along the Danube has increased from about 1.4 million tons to 2 million tons per month over the past year. In May and June, those shipments even crossed the Black Sea corridor, which has been affected by the controls.

From the Danube, grain could be shipped directly to nearby buyers or transported to hubs such as Constanta in Romania, where it was loaded onto larger ships for longer journeys. However, one difficulty was that larger ships could not navigate the river.

In Romania, the Danube River is nearly 40% below its average level in July due to high temperatures, according to Romania's water authority. Water levels remain above a two-decade low reached last year, but could fall further next week.

“The problem is that the water level in the Danube is getting lower and lower due to the drought, so you can’t load barges with wheat,” said Andrei Balasoiu, a grain broker based in Constanta.

Rail and road links will also be a focus. While Eastern European countries continue to resist buying grain from Ukraine, they are allowing agricultural products to cross their borders for delivery. However, the volume of grain transported by rail and road has declined since March, when political tensions began to heat up.

Traders have been using alternative routes. The question now is how long they will be the only option and whether a new Black Sea deal can be reached, said Sergey Feofilov, head of the UkrAgroConsult analysis firm.

Russia has said it is ready to return to the deal if its conditions are met. For months, it has been demanding that one of its agricultural banks be reconnected to the international payment system SWIFT, while also imposing additional logistical and insurance requirements.

Ukraine has said it plans to increase its export capacity through alternative routes, although that could take time. The country’s infrastructure minister has estimated that the Danube alone could handle 23 million to 25 million tons of food exports this year, about half the country’s annual grain exports before the conflict.

Rivers and roads are already economic lifelines, but they now have an even greater influence on global grain supplies and will be key to reducing rising food costs. Alternative shipping routes to the Black Sea “may not be enough, but they will cover a large part of the demand,” said Roman Slaston, head of the Ukrainian Agribusiness Club.

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