Russian attacks on Ukrainian ports have killed over 30 workers and caused billions of dollars in damage, yet most terminals remain operational.
Edgar Martin of Infospectrum, part of Lloyd’s List Intelligence, provides a brief summary and background of the Ukrainian shipping sector in wartime.
THE full-scale Russian invasion of Ukraine in February 2022 has radically altered Ukrainian shipping.
War has rerouted its trade flows, but it has also displaced a once thriving maritime sector that has had to rapidly adapt to operations, often carried out in exile.
The impact of Russia’s naval blockade at the start of the war was perhaps the most visible aspect of this enforced sectoral transformation.
The closure of Black Sea ports meant that Ukraine’s hitherto largely ignored Danube terminals came into their own and started handling more cargo than most had previously assumed possible.
A seven-metre draught restriction limits these facilities to small vessels (typically no more than 10,000 dwt) and resulted in significant levels of congestion. But while other countries talked theoretically about supply chain resilience, Ukraine delivered it.
A UN- and Turkey-brokered Grain Initiative initially got things moving, but since September 2023, a Ukrainian-managed Safe Corridor has enabled the transport of over 120m tonnes (76m of which is agricultural products), according to government figures. This, in part, has come via the widespread support of Ukrainian operators.
According to Lloyd’s List Intelligence vessel tracking data, an average of 198 grain-carrying vessels called at Ukraine’s Black Sea ports each month in 2024.
Intensive and frequent aerial bombardment by Russia of Ukrainian Black Sea and Danube port facilities has had a devastating impact. Due to limited reporting on damage to strategic infrastructure, only certain details have been revealed, but at least 30 port workers have been killed, and estimates of the cost and timescale to repair or rebuild terminal facilities is in the several billion US dollars, over at least five years. Nevertheless, most terminals continue to operate.
But it is not just the loss of life and damage to infrastructure that has changed Ukrainian shipping.
Prior to the war, Ukrainian shipping was dominated by charter operators based in Odesa. Most now, however, operate “in exile” from Glyfada and other suburbs of Athens.
Many had branches in Greece long before the war, but since the fighting began much of Ukraine’s shipping operations have decamped to Athens on a semi-permanent basis.
These companies are acclimatising and have started to employ more Greek and international staff; they are firmly regarded as Ukrainian for the time being, but it is unclear how long this will last.
Will they return to Ukraine after the war? Many believe that they will return to Odesa, although with most men prohibited from leaving Ukraine during wartime, there may be some resentment when those who did leave go back.
Meanwhile, during the war two major Ukrainian grain trading groups (Kernel and Agroprosperis) decided to invest in their own tonnage, a major (although small scale at present) new development flagged by many Ukrainian shipping observers as a hopeful step potentially towards a major new fleet for the country.
Shipping out of the Soviet shadow
Dramatic changes have been witnessed over the course of the war, some for the better and Ukrainian shipping is far different from where it stood at its exit from the USSR 34 years ago.
The Soviet-era Odesa-based Black Sea Shipping Company (Blasco) was supposedly the largest shipping company in Europe by the late 1980s, but its fleet quickly and suspiciously dispersed in the early-to-mid 1990s.
Some of the fleet remained managed by “apartment companies” based in Ukrainian ports for a little longer, but were eventually sold on or scrapped. Despite the limited continuation of the US drinks giant’s Soviet era “Pepsi for Ships” scheme, which planned to build tankers in Ukrainian shipyards, there was no serious fleet replacement.
Nevertheless, world-class seafarer training centres remained (and remain today). This has led to the almost continuous expansion of Ukraine’s crewing agency sector. Today, Ukraine is widely estimated to have around 150,000 active seafarers, ranking the country in the top five or six seafaring nations globally.
By the late 1990s, many shipping managers had moved to the chartering departments of Ukrainian industrial producers and grain traders, groups that by then had to charter from the global shipping market. Other shipping professionals established or were employed by newly formed charter operators, principally aimed at serving the aforementioned two huge sectors. Initially, Industrial Carriers Inc. (ICI), dominated the local market; it was registered in the Marshall Islands in 1999, operated from Odesa, but collapsed in 2008, reportedly with substantial debts.
Newly incorporated Odesa-based charter operators from the mid-to-late 2000s started to change the market for the better. Aquavita and the group of companies initially led by Phaethon International Company SA (Phaethon) of Panama from 2009 led the way with open and professional operations, with both rapidly expanding in the 2010s. Odesa became well-known for being the centre of a large charter operator sector, behind which were mainly local shipping professionals mostly supported by local money (large business groups or “oligarchs” are not known to have been involved). Whilst not registered in Ukraine, most charter operators have local administrative subsidiaries.
Aquavita continues to dominate the market. Newer companies, such as BPG Shipping Company DMCC (BPG) of the United Arab Emirates (incorporated in 2017) have also grown rapidly. Aquavita and BPG were both originally managed from Odesa, but they had offices in Athens from before 2022. These and many other companies strictly have no Russian dealings, although, to the surprise of many, certain Ukrainian charter operators continue to handle Russian cargoes.
Reputation reclaimed
Despite the sometimes-troubled reputation of the Ukrainian shipping sector, which may stem from the rapid break-up of Blasco, and later ICI, the majority of professional and open Odesa-based companies were largely successful in turning the reputation of Ukrainian shipping around by the late 2010s.
By operating professionally and competitively, certain companies have seen considerable financial success. The principals of several Ukrainian charter operators have invested in their own tonnage in recent years, although the owned units are often managed entirely separately from the group’s operation of third-party tonnage. Meanwhile, other charter operators have moved into the provision of commercial and technical management services for third-party clients. More traditional shipowning and management structures have also existed in Ukraine for several years, such as the 12-strong fleet of the Intresco group.
From the Wild West of the 1990s and later the failure of ICI, dependable charter operators and vessel managers have expanded in scope and size. Perhaps most critically, their reputation has improved. Many of these companies have proved themselves over many years to be reliable partners. For many companies this has continued despite the Russian invasion.
Rogue elements remain, but for those who undertake suitable due diligence, even during wartime they will find world-leading charter operators, vessel managers, professional charterers at grain trading groups, and top-quality seafarers and officers in Ukraine.
Edgar Martin is Infospectrum head for Central & Eastern Europe
