Earlier this week, the Russian media revealed that the OZK plans to order 14 new Russian-made sea dry cargo ships to transport grain to developing countries, citing Viktor Evtukhov, deputy head of the Ministry of Industry and Trade, and the trade operator's representative. In addition to that, the Russian company also plans to purchase five bulk carriers on the secondary market by 2025. Why is this important?
Western Sanctions Crippled Russia's Food Trade
Following the beginning of the Russian special military operation in Ukraine, the Group of Seven and its allies slapped sweeping sanctions on virtually all sectors of the nation's economy, including the financial and banking sector, transportation, energy, and many others. The country was severed from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and banned from making or receiving international payments using the mechanism. Russia was also prohibited from receiving banknotes of and transferable securities denominated in any of G7 and other Western currencies.
Despite the European Council's declarations that the West has not slapped sanctions on Russian exports of food to global markets, reality proves otherwise. The aforementioned restrictions crippled Russian trade, with the nation's customers unable to make payments through the established banking mechanisms or to settle deals in dominant reserve currencies with Moscow. Western shippers and insurers refused to transport Russian goods, while hundreds of thousands of tons of Russian-made fertilizers remained blocked in European ports.
27 December 2022, 00:41 GMT
The Western press admitted in March 2022: as sanctions bite Russia, "fertilizer shortage imperils world food supply." In May 2022, the African Union, a continental union consisting of 55 member states, raised the alarm of the "collateral impact" of the West's unprecedented sanctions on Russia's food supplies to the Global South.
To make matters worse, the West's sanctions cut off millions of tons of Russian grain and other agricultural goods from the global market, adding to rallying food prices and accompanying inflation. The Western mainstream media rushed to pin the whole blame on Russia's special military operation in Ukraine, insisting that the sanctions spree has nothing to do with it whatsoever.
When speaking about the significance of Ukraine's food supplies, allegedly "blocked" by Moscow, the Western press usually noted that "together" Russia and Ukraine account for 30% of global wheat exports. Unfortunately, Western reporters failed to specify that two thirds of these exports come from Russia. Likewise, the global "fertilizer price shock" could not be attributed to anything but Western sanctions, given that Russia is the leading exporter of the commodity while Ukraine's global share of fertilizers is trifle.
Thus, unsurprisingly, the unfolding food crisis did not ease after Russia created safe corridors for Ukraine's agricultural goods in the Black Sea, especially given that the lion's share of these supplies went to industrialized nations instead of the starving Global South. Meanwhile, Russia's agricultural supplies remained blocked by the West, even though Moscow is willing to provide hundreds of thousands of tons of fertilizers and grain for free to poor countries.
9 December 2022, 12:30 GMT
Russia is Building Its Own Dry Cargo Fleet
Russia's agricultural producers and exporters are not cherishing hopes that the West will lift restrictions in the foreseeable future. The sanctions spree has sent a clear message to Russia and other developing countries of the world that reliance on Western services and mechanisms comes at a cost.
Grain accounts for more than a third of Russia's agro-industrial exports, with over 80% of the commodity being transported by sea. Russian exporters, including the OZK, do not have their own bulk grain carriers: they charter these vessels. After the beginning of the special military operation in Ukraine, a number of international companies refused to transport Russia's cargo and enter the country's ports, fearing "secondary sanctions." Furthermore, the costs of transportation of Russia's commodities by foreign companies have soared over sanctions increasing the price tag for end users.
Therefore, the creation of its own cargo fleet for the export of Russian food has become a strategic task and an important factor in the development of the agro-industrial complex in Russia, according to the nation's Ministry of Agriculture. This will help Russia kill two birds with one stone: first, it will not depend on the West's anti-market rules; second, it will be capable of offering reasonable prices for its customers.
The construction of dry cargo vessels has been included in Russia's long-term plan until 2035. According to information from Russian shipyards, the first dry cargo ship for the OZK could be launched by 2026. Russia's United Shipbuilding Corporation (USC) – the country's largest manufacturer of the civil fleet – has all the necessary competencies to design large-capacity vessels, including bulk grain carriers.
Currently, Russian exporters need at least 61 grain carriers, of which 27 need a carrying capacity of 40,000 tons and 34 require a capacity of 60 thousand tons, according to the Ministry of Agriculture. For its part, the OZK needs 19 bulk carriers of 40,000-60,000 tons deadweight (DWT) to ensure the uninterrupted operation of the terminal of the Novorossiysk Bakery Products Plant and the export of grain to friendly countries. The OZK may spend around 38 billion rubles ($544 million) to acquire 14 new Russian-made vessels and five 10-year-old bulk carriers of 40,000 DWT, as per Russian media
Scale models of the United Shipbuilding Corporation vessels
© Sputnik / Alexei Danichev
/ Western Press Blows a Gasket
Russia's intent to become independent from Western shippers and insurers has apparently hit a raw nerve in the West. Russia has beefed up its own tanker fleet, which is now covered by domestic insurers, including some operating since 1947. Over the past several months, the US and European mainstream press has been discussing the trend using derogatory language.
Thus, Russia's fleet is usually called either "dark" or "shadow"; the transportation of Russian grain and crude by the nation's fleet is sometimes described as "smuggling"; Western reporters mince no words when casting doubt on the operability of Russia's insurers, while presenting zero evidence to back their concerns. In addition to that, some Western media outlets have raised the alarm over the potential environmental "threat" allegedly posed by Russia's vessels.
One Western newspaper depicted a gloomy picture of Russia's "dark" fleet "smuggling" agricultural goods from Crimea in June. The media called Crimea "occupied" Ukrainian territory, even though the peninsula's population overwhelmingly voted to reunify with Russia back in 2014, and insisted that the transportation of goods from the region is "illegal."
The media also cited suspicions that the goods in question could have been "stolen" by Russia from Ukraine, adding, however, that it has zero evidence to confirm the claim.
Remarkably, the newspaper relied on satellite photographs provided by notorious Ukrainian neo-Nazi group Mirotvorets, the one that runs a "kill list" on its website exposing the personal data of international journalists working in the Donbass region. Every time an individual on the list is killed, a "liquidated" inscription appears on his or her photograph on the website. In February 2021, the European Parliament urged Kiev to shut the Mirotvorets website down, but in a bizarre twist of fate, it is now treated as a legitimate "activist" source.
Self-Reliance as New Global Trend
Russia's efforts to continue providing the oil market with its goods are welcomed by major developing countries, with most of them refusing to join the West's unilateral anti-Russian sanctions.
Countries are shifting to their own domestic maritime transportation, domestic insurers and local currencies, reducing the West's control over the flow of money and goods worldwide. Self-reliance and self-sustainability have come to the forefront of the developing world's agenda, as trust in the Western-led global institutions is waning.
The Western-centric system is gradually falling apart at the seams. American and European observers acknowledge that the world is on a deglobalization track. US-based Peterson Institute scholars have suggested that the world economy may soon split into blocs, while an old Atlanticist magazine predicted the forthcoming transformation of global politics with China, Russia, India, and other developing countries creating polarizing spheres of influence as well as neutral blocs.
Meanwhile, Russian scholars are forecasting the emergence of new "macro-regions" and different currency zones. The forthcoming year will show whether the deglobalization trend will continue to gain momentum.