The Russian invasion of Ukraine has blocked important ports in the south. The country therefore has great difficulties in exporting its goods. The search for alternative routes overland reveals logistical challenges and bureaucratic hurdles.
Thousands of railway wagons with valuable cargo are currently stuck in Ukraine because of the war: wheat, vegetable oil, iron ore, metals, chemicals and coal – in demand worldwide. A total of 24,190 wagons with export goods are waiting to cross Ukraine’s western border. This emerges from data from the state railway company, which has not yet been published.
Since the southern coast of the country with the most important ports is blocked by the Russian invasion, Ukraine has great difficulties exporting its goods. Kyiv is therefore looking for alternative routes by land. However, this is hampered by logistical challenges and bureaucratic hurdles, as industry representatives and commodity traders complain. 10,320 wagons – about half the total number – are waiting at a junction near the village of Izov, says Valeriy Tkachev of the state railway company Ukrzaliznytsia.
The most important railway border crossing to Poland is located about 130 kilometers north of Lviv and is considered the gateway to the Polish seaport of Gdansk. A major issue is the sheer volume of goods that need to be diverted. There is a lack of wagons and staff, say insiders from business and government. Ukraine, one of the world’s largest grain exporters, exported 98 percent of its grain across the Black Sea before the war. Only a fraction of exports were transported by rail, also because the transport costs here are higher than by sea.
Food crisis warning
Difficulties are exacerbated by logistical problems such as the different track gauges in Ukraine and neighboring countries like Poland – a legacy from when Ukraine was still part of the Soviet Union. Security aspects also play a role: while the west of the country has so far been spared the worst of the fighting, there have been rocket attacks near Lviv. The security precautions at the border are correspondingly strict. Countries like China, Egypt, Turkey and Indonesia that depend on imports of Ukrainian grain now have to find alternative sources of supply. Otherwise there is a risk of food shortages, as aid organizations warn.
Russia’s invasion of Ukraine on February 24 has therefore heightened concerns about global food security. At the same time, the prices for grain, fertilizer and fuel have skyrocketed worldwide. Since then, wheat has increased in price by more than a quarter to around 360 euros per ton. The price of oil had temporarily risen by around 40 percent. Ukraine depends on the proceeds from the export business. Their grain exports are a cornerstone of the domestic economy. They added up to $12.2 billion in 2021, which is almost a fifth of total exports.
“Hundreds of millions of people around the world will go without food unless the Russian blockade of Ukrainian ports is lifted soon,” the Ministry of Agriculture warned. The Ukrainian farmers had brought in record harvests in 2021. Also thanks to favorable weather conditions, more than 100 million tons of grain, legumes and oilseeds came together. Farmers now fear their wheat yields will collapse by at least half.
According to US information, Russian forces have repeatedly attacked grain storage facilities in eastern Ukraine. “As Putin’s war rages on, more and more of Ukraine’s farmland is being destroyed by Russian tanks, shells and land mines, which could lead to a much longer-term food crisis,” warns a US official. Kyiv and Moscow accuse each other of laying mines in the Black Sea and endangering merchant shipping. Ukraine and Russia are major exporters of wheat, which together account for about a third of world exports – almost all of the crop is transported through the Black Sea.
The problem with the track width
The rail network is crucial for the onward journey of the wagons. The one in the Ukraine is normalized to the Russian track gauge of around 1.5 metres. That is about 10 centimeters more than the width used in most European countries. Therefore, the railway staff have to lift the wagons with jacks and manually adjust the chassis to the Polish tracks, says Tkatschow. Alternatively, they can unload the wheat and transfer it to the Polish wagons – a process that can take up to half an hour per wagon.
Up to 500 wagons a day currently cross the border at Izov, says Tkatschow. The state railway is working to increase the capacity for border crossings to Poland, Romania, Hungary and Slovakia to 1,100 grain wagons per day within three months – an increase of almost ten times compared to March. The company is hiring new staff and purchasing equipment to support the rail bogie conversion. “We are working to speed up the process by reducing the number and duration of car checks and the amount of paperwork,” says Tkachev.
Astarta Holding NV, a food manufacturer from Ukraine, is one of those affected by the backlog. Astarta plans to deliver 25,000 tons of corn to European customers in April. The railway authorities have not yet given the green light for this, says Astarta director Julia Bereschchenko. According to the company, it currently has about 150,000 tons of grain in its silos, mainly corn. The warehouses are actually almost empty at this time of year.
Food does not come from the country
According to government data, about 1.4 million tons of corn and wheat were exported in March. That’s about a quarter of February’s figure and a drop of around three million tons compared to March 2021. Also included in this statistic are grain that was loaded onto ships and is now stuck in blocked ports, says Deputy Agriculture Minister Taras Vysotskiy .
According to analysts, Ukraine, which exported 43 million tons of grain from the start of the season in July 2021 until the invasion at the end of February, could only export about a million tons over the next three months due to logistical difficulties. Before the war, the government estimated that exports could reach 65 million tons.
Commodity traders like Cargill are looking for any opportunity to get food out of the country. But there’s no easy fix, says an insider. For example, Kyiv is holding talks with Romania about shipping its agricultural products via the Black Sea port of Constanta there. This would mean that the grain would have to be transported by rail to the Danube shipping ports and then loaded onto barges that would then head to Constanta, industry insiders say. In the Romanian port, the grains would then have to be reloaded onto large ships in order to be shipped around the world.
The entire process is complex and therefore very expensive. According to APK-Inform, a Ukrainian agricultural consultancy, the cost of delivering Ukrainian grain to the Romanian port of Constanta ranges from 120 to 150 euros (133 to 166 dollars) per tonne. Before the war, traders paid about $20-$40 per ton for shipment to the Ukrainian Black Sea ports.
“The risks are enormous”
Hopes for a quick reopening of this route have recently been dashed: according to local authorities, Russian missiles hit the port of Mykolaiv on Sunday and also hit oil facilities near the Odessa hub on the Black Sea. Russia said its missiles destroyed an oil refinery and three fuel depots near Odessa. The Ukrainian government is also worried about the domestic supply of food – although it says it actually has supplies for three years.
In March, the export of rye, oats, millet, buckwheat, salt, sugar, meat and cattle was suspended as a precautionary measure. At the same time export licenses for wheat were introduced. However, the government emphasizes allowing the free export of corn and sunflower oil. Oil has recently become scarce in Germany too. Even if the country were to succeed in increasing its export capacities from 700,000 to one million tons per month by rail and via the Danube, this would only be a “drop in the bucket”, says the manager of one of the most important foreign companies active in the country Commodity traders are pessimistic: “We might achieve 10 to 15 percent of the capacity that is actually needed,” he says. “I think the risks to the economy are enormous.”