Exclusive Interfax-Ukraine Interview with Andriy Klymenko, Head of the Monitoring Group of the Black Sea Institute of Strategic Studies and Editor-in-Chief of the BlackSeaNews

Text: Alyona Mangelo

 

What is currently holding back the growth of cargo traffic from Ukrainian ports: their capabilities, risks and freight costs, supply chains to ports, or the economic situation in the country?

The biggest constraint is the lack of the required number of air defense systems. Greater Odesa is a large region, and if you also take in account the expansive infrastructure of several Danube ports located there, it becomes clear that one Patriot battery isn’t enough.

We need several divisions of modern air defense systems of various types and characteristics. That is, the air defense of ports must be very powerful. Until then, we can certainly keep wasting our breath discussing freight rates, loading speeds, berthing times, etc.

In truth, the main factor is the level of protection against air strikes. Despite the risks, however, I’d like to suggest another criterion for our current port operation besides the simple increase in the number of vessels calling at the ports of Greater Odesa — namely, the number of those ships’ repeat calls there. Those make about 65-70% of the total number of vessels. Some of them have already called there for the fifth or seventh time, while others have done that 10 or 12 times. What does it tell us? Obviously, that shipowners rate the security level quite highly — otherwise, they wouldn’t have risked their ships, costing millions, and the lives of their crew members.

I heard a top manager of one of Ukraine's largest exporters say that only "scrap metal" — the cheapest shipping companies with risky crews — flying the flags of African and similar countries use the Ukrainian corridor because of the high risks. In your opinion, is that an appropriate remark?

That is a very superficial and subjective statement. At present, 25-30% of vessels calling at the ports of Greater Odesa are owned by Greek and Turkish shipowners, respectively. That’s half of all the vessels. In general, shipowners from more than 25 countries are now present in the Black Sea ports. There are also Ukrainian-owned ones there, but relatively few. Another interesting fact to note -— about 5% of the ships calling at Odesa ports belong to Chinese.

Clearly, that serves as an additional protection. After all, Russia can’t help but realize that if their missile hits a Turkish ship docking or in crossing, they would face a harsh talk with Erdogan (Turkish President Recep Tayyip Erdogan — IF-U). It seems that Russia isn’t eager to have such a conversation with Xi Jinping either.

As for the “scrap metal,” old vessels are found everywhere. For example, according to our database, of the 12 random ships that arrived on July 5, 2024, half were built in the 2000s, with only 5 of them under 20 years old, and 3 — in the late 1990s. This is a fairly normal age for dry cargo ships. As for the flags, we see rather typical set of flags, so to speak, most of them — of Liberia and Panama.

How important is the ability to transport cargo in containers to boost cargo flows and expand the range of goods? Recently, container ships of a world leader MSC have started making calls at our ports. Is that the evidence of growing confidence in Ukrainian ports despite the ongoing war?

Absolutely. MSC is the global giant. Huge companies like MSC, that operate hundreds or even thousands of ships globally, have powerful risk research institutes. They transport cargo worth billions of dollars. And any loss — the Red Sea troubles are the first that come to mind —  means a huge amount that shipping companies have to compensate the cargo owners. That is why they are very meticulous in their risk analysis. So, the fact that MSC container ships have started making calls at our ports shows that for the company, a year of the incident-free Ukrainian sea corridor operation is sufficient enough evidence that the Ukrainian defense forces provide an acceptable security level.

Most public attention is now paid to securing exports, but what about maritime imports? How important was it before the war and how important is it now? What are its dynamics and have there been any changes?

Before the war, Ukraine's seaports accounted for about 60% of all domestic exports and 40% of imports. At present, we can only talk about exports, since only that data is partially available. Understandably, at the time of war, there are no public numbers for imports. 

Russia openly claims that Ukraine is importing weapons to Odesa ports by sea and that is how they justify their ballistic missile attacks on port infrastructure. And that's why they consistently, even though unsuccessfully, use their friends in Turkey to periodically throw in messages lobbying restoration of the "UN corridor" that entails cargo control. I don't think it's appropriate for us to comment on sea imports right now. As government officials don’t comment on the issue, neither should we.

There have been media reports on the shelling damage to ships. At the same time, there have been no reports of war risks being covered by the state fund. Why so?

Conspiracy theories is not our forte. We know that an insurance fund has been created and that half of it is underwritten by the Ukrainian state budget, while the rest —  by several leading global insurance companies. It was a really good decision, because it demonstrates to the global insurance business that Ukraine is ready to participate in covering the losses. So far, I am not aware of any insurance claims to the fund, nor any complaints about its operation.

Last year, a missile hit a bulk carrier in the Pivdennyi port, sadly, killing the Ukrainian pilot and injuring two foreign crew members. But it doesn’t appear to have been a targeted attack. It was a small, anti-radar missile and according to one version, it might have simply automatically guided itself towards the ship, reacting to its radar. As far as I understand, for that very reason, they advise ships to turn off radars in Ukrainian ports.

There was also a strange explosion on a ship about to enter one of the Danube mouths, but no further information followed. So, in summary, we have two incidents per year per about 2,500 thousand vessels. That’s not a lot, although in each of the cases, one can’t help but sympathize with the injured sailors.

More serious than the missile threat nowadays, though, is mine danger in the Black Sea. Of course, we hope there would be no claims to the insurance fund due to those.

Why do you consider mine danger in the Black Sea to be the biggest threat?

It’s a well known fact that before the start of the Great War, several thousand mines had been placed there both by Ukrainians in front of our ports, and also, by the Russians to hamper our sea traffic. Naturally, after all this time, the mines are being blown up and carried into the sea. And that opens up a window of opportunity for Russian insinuations and false flag sabotage, which are truly the Russian trademarks.

For example, if a mine they secretly plant damages a merchant ship, they will start claiming that it was a Ukrainian mine. So we see that as the main danger in the short term.

For that reason, last spring at the Black Sea Security Forum in Bucharest, Ukrainian experts proposed creating a Black Sea minesweeping group with the participation of Turkey, Romania, and Bulgaria. Ukraine has been persistently promoting that idea, and a few months ago, it was finally put into practice. For a year and a half, at the state military and diplomatic levels, Ukraine has been pushing for the three countries, all of whom are NATO members, to accomplish that. And they have, but only after dozens of mines had washed up on their coasts, including Turkey's. You see, the problem is that while we (Ukrainians - IF-U) live and work in wartime conditions, other countries continue to function within the peacetime mindset that is difficult for them to get out of. The task now is to ensure that the minesweeping group operates not only in the 12-mile territorial sea zone of Turkey, Bulgaria and Romania, but also beyond it.

What would that depend on?

It obviously depends on the political will and courage. After all, to this day, for many government officials in neighboring countries, the increased risk is not being blown up by a minesweeper, but being presented with a paper of disapproval from the Russian aggressor...

How much damage has our enemy caused by shelling the port infrastructure and what impact does it have?

As you can see, no one is talking about it on the air. We all have some snippets of information, but I'm sure we shouldn't discuss those. If we say that a missile arrived at terminal or warehouse number one in such and such a port, we would be helping the enemy.

Yes, there is definitely damage to the port infrastructure, and a serious one.   Ukrainian business is trying to cope with it as quickly as possible — what can be restored is being restored. By the way, I always stress that I take off my hat to the Ukrainian maritime business and all its work, as well as for its optimistic, stubborn and patriotic character.

Overall, those Russian strikes won’t be able to disrupt the entire infrastructure of Odesa ports, especially the Danube ones Since last year, the Danube has had port infrastructure wherever there is a shore and access to water. Russian missiles can destroy a single warehouse or terminal, or even several of them, but they cannot destroy the entire port infrastructure. The facilities are too large and very extensive. There will be business losses and, unfortunately, human losses until, as we mentioned above, we cover everything with reliable air defense.

How did the current long-term power outages affect the Black Sea ports operation?

Air raids have a more significant impact. When they are announced, all loading and unloading operations stop and employees must proceed to the shelters, which obviously, slows down the work pace.

After the reopening of Odesa seaports, cargo traffic in the Danube ports began to decline and the transshipment facilities built during the war are currently underutilized. In an interview with our agency, Viktor Berestenko, President of the Association of International Freight Forwarders of Ukraine (AIFFU), said he believed that due to the shrinking Ukrainian cargo base, the Danube would return to its pre-war volumes or even roll back further. Do you share that view?

What the Danube ports and those responsible demonstrated last year is without an exaggeration, an act of heroism. The rise of transshipment figures by almost six times is definitely a feat. To make it possible, many people, both in government and business, have put forth an extraordinary effort. They took the steps and did the difficult things that everyone had long known were necessary, but that in peacetime nobody got round to.

I repeat, a sixfold increase in transshipment is a feat. In order to make it possible, a lot of people had to fulfill rather complicated tasks, including, foremost, deepening the Danube's fairways. For the entire time of their existence in independent Ukraine, the Danube ports had not seen ships of the size that called there in 2023. A huge amount of work has been done by both Ukrainian and Romanian government agencies. The number of pilots, without whom it would’ve been impossible to pass the Danube mouths, has increased several times. And previously, there hadn’t been that many of them in general. Before the Ukrainian maritime corridor, Ukrainian Danube ports, together with Romanian ports, had literally saved Ukrainian exports.

Certainly, compared to Odesa ports, logistically that is a less convenient route. And we are seeing that this year, quite naturally, many vessels that used to operate on the Danube are now focusing on the Black Sea ports. So, our Danube ports will see a decline in numbers, but I believe those will be still higher than the pre-invasion ones. Of course, there will be no record volumes. However, the Danube should not be underestimated. When you are shelled by the enemy every day, having a backup route is crucial.

Needless to say, that backup route needs to be well maintained in terms of hydrography, navigation, and infrastructure. I think that everyone in Ukraine understands this, and those who still don’t, will have to very soon.

In your opinion, how relevant and necessary are now concession projects in the Black Sea ports? There is a lot of talk that the concession in the port of Chornomorsk is on the agenda.

For those, you need a completely fearless investor — all that will happen after the war. Now, according to our experience, there may be some local projects in some safer places than Odesa. But after the Victory, there will be a real investment boom, I guarantee you.

How do you see the immediate future of Mykolaiv ports? What is happening there and have they managed to remove all the vessels that had been blocked there due to the full-scale invasion? Does Ukraine need these ports?

They are very much needed! According to our own data, as of February 24, 2022, at the beginning of the Great War, there were exactly 100 commercial vessels in Ukraine's Black and Azov Seas ports. As of the end of last year, after some of the blocked vessels had been able to leave Odesa ports through the corridor created with the UN assistance, 50 of them remained. Of those, 29 were in the ports of the Mykolaiv Oblast, 14 in Kherson, and 5 in Mariupol. Only two remained in Odesa ports, one of which was arrested due to its Russian owner. Most of the remaining vessels belong to Greek and Turkish owners.

Of those blocked in Mykolaiv ports, based on the shipowners registration, seven ships are Turkish, eight Greek, two each from Norway and China, 1 each from Estonia, Denmark, Singapore and the United Kingdom. Those are large seagoing vessels that had come for cargo before the full-scale invasion, but got stuck and still can’t leave. With the ships remaining in the ports of occupied Mariupol, the situation is still clearly hopeless. But there should be no illusions about those blocked in the ports of the Ukraine-controlled territory either: until the southern part of the Kherson region is de-occupied, they will remain blocked.

Almost every day we read about the shelling of Ochakiv and the adjacent waters. There are active hostilities there. To unblock it, we need to liberate Crimea and, of course, the occupied part of Kherson Oblast. 

In addition, we have no clear understanding of what happened to the ships that remained in Kherson Oblast after the flood (as a result of Russia blowing up of the Kakhovka hydroelectric power station on June 6, 2023 — IF-U). It is possible that a significant number of those vessels have been lost or need to be repaired.

What can really be done to counteract Russian oil exports by sea?

The situation looks as follows: it's not about the so-called "shadow fleet," that doesn't really exist, and not even about the sanctions. The point is that, relatively speaking, half the world has joined the sanctions coalition against Russia, while the other half has not and is not going to. Therefore, Russia has simply reoriented its offshore oil exports from the European Union to countries such as Turkey, our closest neighbor, India, China, Singapore, Malaysia, Brazil, and African states.

The world can’t do much to prevent that in the Bosphorus Strait because it is controlled by Turkey, that today is one of the largest importers of Russian oil and oil products. Up to 60% of Russia’s oil product sea exports shipped from the Black Sea ports go to Turkey. That is three times more than Turkey imported before the Great War.

And it's no secret that Turkey, simply put, repackages those imports, maybe with certain modifications, and then exports them, making good money on it. Consequently, they don’t want to dampen their relations with Russia.

However, it is possible, for instance, to apply some measures in the Baltic Straits, that are controlled by Denmark. Today, of about 1,000 tankers transporting Russian oil, only around 90 are on the US and UK sanctions lists. We need to expand those lists as much as possible, adding to them the tankers themselves, and not the companies that own or operate them. Then those tankers won’t be able to pay for services in dollars and euros and thus, won’t be able to use the pilot services in the Baltic Straits. They may also have problems paying for services in the Suez Canal.

But if it’s not done, that "perpetuum mobile" of the war would be endless, and the war will continue until Russia runs out of oil.

Are Russian revenues from maritime exports higher than Ukrainian ones?

We should estimate the cash flow, so to speak. I'll give you a few figures from the results of our own monitoring.

Every month Russia exports from 4 to 6 million tons of crude oil and about the same amount of oil products from the Black Sea ports. So, for the year, since July 2023, the total volume of oil exports amounted to about 42.9 million tons of crude oil and 43.6 million tons of oil products. Measured physically, in tankers, it equals 30-32 huge crude oil tankers and 140 oil product tankers monthly. That is Russian raw materials that are under sanctions in the West. Then there are another 45-50 large tankers a month with Kazakh oil, that is not under sanctions, but that Russia also gets its share from  — all in all, about 220 tankers a month.

So, even without Kazakh oil, the very roughly estimated cash flow comes to about $50 billion a year. And that’s only oil and oil products, not including other Russian exports.

By comparison, 60 million tons of Ukrainian grain over the same period yield a cash flow of $12-15 billion a year.

Add to that Russia’s oil and oil product exports from the Baltic ports, that continue undisturbed. From there, Russia exports even more oil — about 11 million tons monthly, plus another 3.5 million tons of oil products. Therefore, until the international community finds mechanisms to stop Russian maritime oil exports, the war will continue. Until those numbers fall at least twofold or threefold, Russia will have enough financial resources to continue the war.

In other words, the issue we face is not just maritime exports, but a maritime economic war.

How do you assess the prospects for shipbuilding recovery in Ukraine?

This should and will be resolved by business after the victory. There is no doubt, that even after we win the war, Ukraine will remain a frontline state, whose main function will be to deter the Russian Empire, safeguarding not just itself but the entire European civilization from it. As an engineer both by trade and experience, I certainly understand that in those circumstances, industry must be protected from possible air and missile attacks. However, to hide facilities as huge as traditional shipbuilding enterprises underground is impossible.

From time to time, projects to popularize the Ukrainian flag have been voiced in Ukraine, but so far without much success. The new Maritime Strategy mentions the idea again. How can we make it work?

The recently approved Maritime Security Strategy of Ukraine contains the following paragraph: “…creating favorable conditions for the development of shipping, the maritime industry and inland waterway transport, in particular by attracting domestic and foreign investments, optimizing the system of port dues and bringing them in line with the competitive level, enhancing the image of Ukraine as a flag state and increasing the number of ships flying the State Flag of Ukraine".

We also shouldn’t forget that Ukraine strives to become an EU member in the near future. Therefore, we must keep in mind that, when registering under the flag, any easing, for instance, of a vessel’s technical/environmental condition requirements will be unacceptable.

Among the EU members, only two belong to the so-called Flag of Convenience (FOC) countries — Cyprus and Malta. So instead of inventing the wheel, we should study their experience.

Ukraine has been famous for our sailors and a strong crewing business, but the war has severely undermined it. How likely is it to survive during the war and recover after its end?

We know that a huge number of Ukrainian seafarers are still working on commercial ships around the world and are highly valued by shipowners. That is, the level of Ukrainian maritime education is recognized as high. By the way, a few days ago, a large container ship with Ukrainian officers successfully fought off with automatic weapons a Houthi drone attack in the Red Sea. So, if we preserve maritime education, that activity type will continue. However, the main question and factor is how long the war will last until our Victory.