How has Ukraine fared one year on from the Kerch Strait Incident?

It has been a year since Russia seized three Ukrainian navy vessels and detained 24 sailors, alleging Ukraine was violating Russian waters. Russia has claimed its actions in the Crimea are not aggressive towards Ukraine but acts of re-unification. Much of the world, including the EU and US, condemn this rhetoric.

One year on from what is now known as the Kerch Strait Incident, the vessels and sailors have been returned and the relationship looks to be improving.

Ukraine’s trade has not been ‘hit’ as hard as expected at first as it has seen an increase in port traffic and port exports. Fortunately, the ports in the Black Sea are where most exports are handled. Mariupol’s exports of steel once amounted to two thirds of the country’s exports and Berdyansk exports coal, metals and other raw materials because of its proximity to the sources, making these two ports on the Azov essential to trade.

The first 10 months of 2019 saw a 10% rise in handled cargo in all of Ukraine to 130m tonnes, compared to the first 10 months in 2018. Port traffic rose to around 9,800 vessels, which is an increase of 2.1% year-on-year.

Ukrainian grain exports increased by 32% from June to December of 2019, compared to last market year, attributed to good weather conditions for crops over the year, whilst iron ore exports increased by 8.3% in the ten months to October 2019. From January to October 2019, container handling increased by 19% or an additional 812,000 TEUs. 

These figures show that despite the restriction of the Azov Sea late last year and into this year, Ukraine has overcome the negative Russian influence in the Azov region to deliver improved port export figures.

Although Ukraine’s ports have performed well through the tense year, there are still many unresolved issues born out of the Kerch Strait Incident.

In August of this year, the USPA claimed Ukrainian ports in the Azov Sea have lost nearly €210m in income since the start of Russia’s aggressive annexation of the Crimea in 2014. This doesn’t include the loss to businesses in the region. Earlier this year, it was reported maritime losses amounted to €316m from November 2018 to February 2019. This is not to mention the contracts lost by manufacturers due to the sanctions and Russian influence.

As a result of this, in November of this year, it was reported Ukraine is looking to Russia for €1.1bn worth of compensation for lost property in Crimean ports. This also is related to the construction of the Crimean Bridge. Its hasty construction and low gauge imply its presence is to promote Russian influence in the Azov Sea. Many ships that used to call at the Ukrainian Azov ports can no longer fit under the bridge, suggesting Russia is keen to keep foreign vessels out. This has caused problems for the exports out of Mariupol and Berdyansk. They now handle around 5% of Ukrainian port exports, down from 25% prior to 2014, and with Russian influence in the surrounding areas, it can be hard to redirect trade.

Despite all the obstacles in Ukraine’s way, from the blockade of the Azov Sea, increasing Russian presence in the Black Sea and ongoing tensions in the Crimea, the country is attempting to continue with a business as usual approach. Its port exports are currently doing better than last year. The country continues to try and emerge from its previous misfortunes. The improvement of the business environment in Ukraine as a result of improved fiscal health, deregulation and ease of state control, has acted as an anchor during the turbulent times.

Source: Transport Intelligence, December 5, 2019

Author: Holly Stewart