New price increases for bread and pasta? Russia's Arctic route sends prices soaring. What do we risk?

The war in Ukraine and tensions in the Black Sea are forcing Russia to experiment with new routes for exporting grain, with logistics costs rising sharply. Russian shipments are declining despite good harvests, while Ukraine also continues to struggle with less efficient alternative routes.

The conflict in Ukraine and growing insecurity in the Black Sea are reshaping Russian grain trade routes. In recent days, the Financial Times revealed, a ship loaded with 29 thousand tons of cereals bound for North Africa set sail from the Arctic port of Murmansk, thousands of kilometers from the farms where they are grown, avoiding the traditional Black Sea route.

Difficulties for Moscow

The experimentation with this deviation reflects the growing difficulties faced by Russia, the world's largest wheat exporter. Since the summer, Ukrainian drone attacks on ports and commercial ships have slowed Russian shipments, raising costs and complicating exports. “The main issue is not simply whether we can redirect a certain volume,” Arkady Zlochevsky, president of the Russian Grain Union, told the British newspaper, adding that “logistics will cost much more than shipping through the Azov-Black Sea basin, and someone will have to cover that difference.”

Exports declining

According to Russian railway company Rusagrotrans, grain exports fell by 38% between July and September compared to last year, despite a better harvest. Freight rates on some Black Sea routes have more than doubled since mid-July, forcing importers to look for alternatives, according to Fastmarkets.

Alternative routes

To circumvent the critical issues, some ships sail to inland routes starting from the Sea of Azov, up the Don and crossing the Volga-Don Canal towards the Caspian Sea and buyers in Iran. In other cases, containers are used to transfer grain from rail cars to ships at terminals without conventional bulk cargo facilities. But these alternatives cannot replace southern ports.

Problems also for Ukraine

The problem also involves Kiev. Routes across the Danube and those by road or rail to neighboring EU countries allow only a portion of normal agricultural volumes to be handled. According to Agriculture Minister Taras Vysotskyi, the alternative routes have added at least $50 per ton to logistics costs, wiping out some producers' profits. Attempts to restore shipping to normal have made little progress. Turkey, which helped broker the original Black Sea grain deal in 2022, has suggested separate safe corridors for Russian and Ukrainian ships. Diplomatic attempts, however, have not produced concrete results. Russian President Vladimir Putin rejected the Turkish proposal as "absurd".