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RUSSIAN BLOCKADE PROMPTS UKRAINE TO FIND NEW WAYS TO SHIFT VITAL WHEAT EXPORTS

Talks with Poland and Lithuania come as U.N. warns of worst global food crisis since World War II

By Drew Hinshaw and Alistair MacDonald

May. 6, 2022

The Wall Street Journal

WARSAW—Poland and Lithuania are in talks with Ukraine to have the war-torn country export its summer grain harvest through their ports, circumventing Russia’s naval blockade in the Black Sea and helping relieve what the United Nations predicts to be the worst global food crisis since World War II.

The plans, described in an interview by Poland’s President Andrzej Duda and several Polish, Lithuanian and Ukrainian officials and diplomats, are an attempt to bolster Ukraine’s struggling economy, which depends heavily on exports of wheat, mostly harvested in late summer. Russia’s military has besieged the now desolate port of Mariupol and its navy has blocked access to the Black Sea lanes to other ports, like Odessa.

That has sparked worries over food shortages rippling out from Ukraine, which provides about 10% of the world’s wheat exports, 14% of corn exports and roughly half of the world’s sunflower oil, according to the U.S. Department of Agriculture. The World Bank recently warned of a global food catastrophe stemming from Russia’s invasion. Compounded with pandemic-related problems and other disruptions, the war’s world-wide impact on food supplies is expected to surpass that of any crisis seen since 1945, the U.N.’s World Food Program has said.

To move Ukraine’s wheat out to global markets, Poland would make space available at its seaports in Gdansk, Gdynia and Szczecin, and put those ports at the disposal of Ukraine, said Mr. Duda. Lithuania has made the same offer, he added, which was confirmed by a spokeswoman for Lithuania’s foreign ministry. The two countries are also looking to create port space for sunflower oil, of which Ukraine is the world’s biggest producer.

The bigger issue, he said, beyond storing and shipping the grain, is to transport it out of Ukraine, which has seen extensive damage to its rail network.

“We put an offer on the table, if Ukraine wants, they can use it. They can use our seaports,” he said. “Now the question is how to send the grain to those ports; there are a lot of question marks, and in a way time is running out.”

Next week, Polish and Ukrainian ministries of agriculture and infrastructure are set to hammer out the details of what the two sides can do before Ukraine’s wheat harvest begins in earnest in

little more than a month. Mr. Duda is set to visit Egypt next month to help coordinate the shipments. North African buyers are especially reliant on Ukraine’s wheat.

Normally, up to 98% of Ukrainian grains are shipped via the Black Sea. Currently, the country’s only port access are two small facilities on the Danube, Izmail and Reni, where cargoes are put on vessels that can travel up the river into other European countries, or down toward the Black Sea via other ports. The first cargo of Ukrainian corn to be exported through the Black Sea since the invasion left the Romanian port of Constanta on Friday.

The proposal began last month when President Volodymyr Zelensky told Mr. Duda and his Lithuanian counterpart, President Gitanas Nauseda, that Ukraine’s summer’s harvest is on track to be mostly normal.

Messrs. Duda and Nauseda agreed to let Ukraine use their seaports as part of their effort to help the country prevail in a war that the two postcommunist nations view as an existential threat to their own security. Mr. Duda has also discussed the issue with U.N. Secretary-General António Guterres, the U.N.’s International Fund for Agricultural Development and the World Food Program.

“We can put them at their disposal,” Mr. Duda said, referring to the three Polish seaports along its Baltic coast.

When Poland and Lithuania made their offer, damage to Ukrainian rail networks was more minimal. But since then, Russia has hit several key lines, compromising Ukraine’s ability to freight its grain out of the country. At present, about 30% of Ukraine’s rail network has been struck by Russia’s military, said Ukraine’s ambassador to Poland, Andrii Deshchytsia.

That has left the governments assessing what can be carried overland, he said.

Officials said one alternative being considered was sending trucks in from Poland to help bring the wheat to Polish rail or port connections. The two countries use different rail gauges, leaving trains between them overly dependent on a single terminal.

While Ukraine endures military assaults by Russian forces, analysts are warning that the world’s wheat supply could be severely threatened. WSJ’s Shelby Holliday explains. Photo: Valentyn Ogirenko/Reuters

Lithuanian Railways is ready to organize a new railway route for exporting Ukrainian grain. The route runs from the Medyka terminal on the Polish-Ukrainian border to the Port of Klaipeda in Lithuania. Currently, two terminals in Medyka are able each to pass one train a day. Around 1 million metric tons of Ukrainian grain a year can be delivered to Klaipeda, on the Baltic coast, with the possibility to increase the capacity twice in the near future.

“It’s possible to deliver it by truck from Ukraine into Poland, that’s also a solution,” Mr. Deshchytsia said. More medium-term, he said, there are also discussions about extending Poland’s standard-gauge rail line into western Ukraine, toward the city of Lviv, but not in time for this year’s harvest.

Most Ukrainian grains are currently put on trucks and trains and shipped through the Polish, Romanian, Slovak and Hungarian borders, which then mainly make their way to the ports of Gdynia and Gdansk in Poland and Romania’s Constanta.

“The lion share of exports will go by roads,” said Mustafa Nayyem, Ukraine’s deputy minister of infrastructure.

Poland has already suspended ordinary customs procedures at two checkpoints on its border with Ukraine, on the European Union’s eastern edge, letting trucks pass on the basis of one short form, to help move humanitarian aid.

The other challenge, Mr. Nayyem said, is that Polish and Romanian ports also don’t have the capacity to handle the sudden rush of grains that will hit them from July, when the country’s harvests come in. Ports, for instance, will need warehouses to store grains, he said.

In April, around 1 million metric tons of grains left through these alternative routes, according to the Ukrainian government. The new routes have a capacity for a maximum of 1.5 million tons of grain, according to Taras Vysotskyi, Ukraine’s deputy minister of agrarian policy and food.

Last year, Ukraine exported over 5.5 million metric tons of grains in August and September and 5 million in October. While this year’s harvest yields will be curtailed by the war, even the most pessimistic forecasts still expect around 60% of last year’s exports.