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The Ukrainian “grain crisis” is not over, despite tremendous successes in increasing Ukrainian seaborne exports since the Russian military invaded Ukraine in 2022. Ukrainian exports, like grain and ore, face new logistical challenges beyond the Black Sea, circa October 2023: kinetic attacks by Houthi rebels against commercial vessels transiting the Red Sea. These strikes, nominally executed in the name of retaliation against Israel and solidarity with Palestine, have impacted the shipping operations of more than 50 countries. Yet these attacks pose particular challenges to substantial Ukrainian exports traveling through the Red Sea destined for China.
Despite China’s efforts to mitigate Houthi attacks against Chinese shipping operations, these strikes continue to increase the risk, price, and transport time of Red Sea shipping. Unlike Russian shipments through the Red Sea, which enjoy some protection from an understanding with the Houthis, Ukrainian shipments remain vulnerable to strikes. This disparity exacerbates Ukraine’s existing export challenges, as Russian militarization in the Black Sea has already disrupted Ukraine’s trade operations. While Ukraine has solved one phase of its grain crisis – now including other types of exports – challenges will persist so long as Houthi strikes continue in the Red Sea. In contrast, Russia will continue to profit, even amid the Houthi’s destabilizing strikes across the Red Sea.
Phase 1: Russia’s Naval Blockade and War in Ukraine
First, Ukraine suffered a Russian naval blockade. By May 2022, a declassified U.S. intelligence assessment observed that Russia had successfully instituted a naval blockade in the Black Sea and halted Ukrainian seaborne trade as part of its war. The U.S. government called Russia’s blockade a “deliberate effort” to wreck global supply chains and undermine global resource security. By design, the blockade particularly shocked the Ukrainian economy. Before the war, Ukraine produced and exported about 10% of the world’s grain, with about 95% of its wheat exports from its Black Sea ports in 2020. Because the blockade made these ports inaccessible, partner nations worked to assemble alternative export routes for Ukrainian products by rail. While impressive, these land routes did not return Ukrainian exports to pre-war levels. Ukraine exported up to six million tons of grain per month before the war, reduced by about 50% between 2022 and 2023. The world suffered the consequences. Demand for grain remained high while supply lessened, increasing prices worldwide. Russia lifted the blockade in July 2022.
Ukraine and its allies devised various schemes to export Ukrainian products – mostly agricultural – during wartime. From July 2022 to July 2023, the United Nations Black Sea Grain Initiative, brokered by the United Nations, Turkey, Ukraine, and Russia, facilitated Ukrainian agricultural exports. Through protected shipping lanes bottlenecked by Russian inspectors, the initiative facilitated the export of nearly 33 million tonnes of grain and other agricultural products. Russia effectively dissolved the initiative by exiting it one year later, in July 2023. Ukraine established its own export route in August 2023, hugging the coastlines of NATO allies Romania and Bulgaria to safely cross the Black Sea, and ramped up seaborne exports.
Russia’s militarization of the Black Sea caused indiscriminate logistical problems worldwide. The Russian military laid sea mines, harassed commercial shipping, and even struck civilian vessels in the Black Sea. Inadvertently, Russia even disrupted the trade of one of its remaining allies: China. From July 2022 to July 2023, during the war China imported the lion’s share of Ukrainian grain, becoming the major beneficiary of the Black Sea Grain Initiative in terms of import volume.
In May 2023, China faced a critical need to increase its grain imports after flooding damaged its productive wheat fields. Russia profited. By November, China signed an agreement to import more grain from Russia. In addition to disrupting Ukrainian seaborne trade, Russian forces destroyed Ukrainian crops, storage facilities, and export infrastructure across southeastern Ukraine. Meanwhile, Russia was generally able to meet global demand with its own supplies and by exporting stolen Ukrainian grain. Ultimately, Russia reaped rewards by kicking Ukrainian grain out of the market and disrupting global shipping.
Soon after Russia exited the Black Sea Grain Initiative, Russia dealt further blows to Ukrainian export infrastructure by bombing Ukrainian ports and laying more mines in the Black Sea to prevent and deter more commercial trade. Overcoming these obstacles, in January 2024, Ukrainian grain exports reached pre-war levels. However, challenges to Ukrainian exports persist.
Phase 2: Houthi Strikes and War in the Middle East
Now, Ukrainian shipments face new logistical challenges posed by Houthi kinetic strikes targeting commercial shipping across the Red Sea. In October 2023, the Houthis, operating in Yemen, began attacking civilian ships transiting the Red Sea. The group’s alleged motivation was to target Israeli-linked shipping in solidarity with Hamas after its October 7, 2023 terror attack against Israel. Attacks along this strategic shopping route are especially impactful given that about 40% of trade between Europe and Asia and 12% of the world’s seaborne oil trade crosses through the Red Sea. In 2024, the Houthis vowed to continue attacks and introduce new methods of disrupting Red Sea shipping.
The Houthis’ ongoing strikes have largely rerouted seaborne trade around the Cape of Good Hope — a longer and more costly route. The impacts of the ongoing attacks can be seen in longer transit times, more expensive shipping and insurance rates, and heightened risk to the safety of ships’ crews. Given trade disruptions, Russia and China reached an understanding in March 2024 with the Houthi, which would allow Russian and Chinese ships to safely transit the Red Sea. As a result, Russian and Chinese vessels now still routinely cross the waterway, while many Western-affiliated ships avoid it.
The Houthi Red Sea attacks have specifically impacted international grain shipments, which matters greatly to the Ukrainian economy. Because of the Houthi strikes, many grain shipments have opted to transit the alternative Cape of Good Hope route. This, in part, explains why shipments of grains and oilseeds through the Suez Canal decreased by 20% between November and December 2023, not long after the Houthis began their strikes. Largely due to the Red Sea shipping crisis, a Ukrainian official estimated that Ukrainian seaborne grain exports could decline by around 20% between December 2023 and January 2024. Despite the risks, some ships carrying grain and other products from the Black Sea Region continue to assume the risk of transiting the Red Sea due to the hefty cost of rerouting. Some ships that had been transiting to and from Ukraine during the war are still willing to cross the Red Sea.
The Red Sea especially matters for Ukrainian exports to its top trading partner: China. About one-third of Ukrainian exports are destined for China via the Red Sea. Top Ukrainian exports to China include metal products and foodstuffs. But Ukrainian exports are not safe from Houthi strikes simply because they are destined for China.
Houthi targeting has been fairly capricious, despite claims to only target shipping affiliated with Israel and its allies. In February 2024, the Houthis fired two missiles at the Greek-owned, Marshall Islands-flagged cargo ship MV Star Iris carrying grain to Iran. When the Houthis struck the MV Star Iris, the group alleged it targeted an “American” ship without providing any evidence. The ship was carrying grain to Iran, a well-established sponsor of the Houthis. This incident exposes the Houthi’s imprecision when it comes to protecting shipping that benefits allied states. The Houthis seem to rely on outdated shipping data, which leads to targeting errors. Within one week of reaching an understanding with China to protect Chinese shipping, the Houthis hit a Chinese oil tanker. Effectively, no ships are safe. Even if China were able to provide information about vessels transiting to China, there is little confidence that ships carrying Ukrainian grain would be protected.
Perhaps the Chinese military could accompany shipments of Ukrainian products destined for China. After all, the Chinese Navy began escorting a handful of Chinese cargo ships through the Red Sea in February 2024. However, it is unclear to what extent China can protect shipments destined for its ports.
What will this look like, practically, for a ship exporting Ukrainian products to China? Take, for example, the Panama-flagged bulk carrier New Horizon operated by Chinese company Sea Eagle Marine Co., Ltd. It is currently transiting through the Red Sea from the Ukrainian port of Yuzhny to the Chinese port of Nansha. Will this ship be shielded from ballistic missile strikes under the Houthi-China understanding? Do the Houthis have the proper information to assess if the ship is China-linked? Can the Chinese Navy escort the vessel to ensure its safe transit? There is no perfect system for Ukrainian exports through the Red Sea — only significant risk.
Meanwhile, Russia Profits
Russia continues to benefit when Ukrainian exports are complicated and compromised. Perhaps less directly, Russia profits from what the Houthis claim are protected shipments across the Red Sea, while Ukrainian exports remain at risk. However, Russia has not been completely immune to the negative effects of Houthi strikes, despite the Russia-Houthi shipping understanding. For instance, in January 2024, the Houthi rebels targeted a British tanker carrying Russian oil — aligned with the Houthis’ political mission to target Israeli allies’ ships but violating the spirit of their understanding with Russia. Analysts believe the Houthis accidentally targeted the vessel using outdated information.
But overall, the strikes have been more helpful than harmful to Russia. Houthi strikes against Red Sea shipping have led to increased exports from Europe to Asia by rail via Russian railroads. Rail transport, which is more cost-effective than air freight or seaborne transit and can be faster than seaborne transit, has emerged as a viable alternative. Russian rail bookings declined when Russia invaded Ukraine but have since risen due to “good transit time and prices.” Further, demand rose when the Houthis began their attacks, as companies scrambled for more secure transportation routes. The Dutch firm Rail Bridge Cargo observed that demand on Russia’s railways increased by 37% in January 2024 alone. But naturally, this is not an attractive option for Ukrainian shipments, which will continue to transit the risky Red Sea route, while Russia profits from the increase in rail shipments. Further, there is the opportunity for Russia to increase its grain exports to China, by rail or through protected shipments across the Red Sea.
Even if regional parties can successfully reestablish the new Black Sea Grain Initiative currently being negotiated, this will not solve the Red Sea shipping crisis for Ukraine. Despite amazing successes, Ukraine’s export crisis should not be analyzed in the past tense. It remains to be seen whether China can offer protections to Ukrainian goods transiting to China, whether Ukrainian shipments can find alternative routes to sidestep the Red Sea, or whether other arrangements can be made, especially before the upcoming summer and fall harvest seasons. Until then, Ukraine’s export crisis continues, and Russia continues to profit as the Houthis disrupt trade across the Red Sea.