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Business News/ News / World/  One missile shook Ukraine’s grain trade. Another might kill it
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One missile shook Ukraine’s grain trade. Another might kill it

Oleksiy Vadaturskyy tried to find a permanent fix to Russia’s hold over grain exports out of Ukraine’s Black Sea ports, and it made him a target

Ukraine's grain trade is under serious threat as the war with Russia continues. (REUTERS)Premium
Ukraine's grain trade is under serious threat as the war with Russia continues. (REUTERS)

Andriy Vadaturskyy was in France when he got the call he’d long feared: A Russian missile had destroyed his parents home in southern Ukraine, killing his mother. For three impossibly long hours he held out hope for his father, the revered founder of one of Ukraine’s largest agricultural businesses, but then he too was found dead under the rubble.

“I kissed my kids and drove to Ukraine," said Vadaturskyy, in his first interview since the July 31 attack that saw him take over within days as Nibulon Ltd.’s owner and chief executive. “I was driving and crying. I did not know I could cry for so long."

Within hours of the attack, a spokesman for the Ukrainian president’s office said the missile’s course left “no doubts" the Vadaturskyys had been targeted, a theme picked up widely in the nation’s media. The strike came just a day before Russia allowed the first vessel since the start of the war to sail from nearby Odesa, under a deal to get Ukraine grain back into global markets and tame raging food price inflation around the world.

That deal expires on Nov. 19, and it’s unclear whether Russia’s President Vladimir Putin will renew it. If he doesn’t it could send grain prices soaring again and savage Ukrainian farms that, according to US estimates, employed 14% of the population and provided $27.8 billion in export revenue in 2021.

There are reasons for Putin to continue with a deal he agreed to only under intense international pressure, but Vadaturskyy, for one, is a skeptic.

Although a forensic investigation is still underway, initial indications are that Oleksiy Vadaturskyy and his wife Raisa were killed by one of the precision guided S-300 anti-aircraft missiles that Russian forces have been firing for months at ground targets in Mykolaiv, their home town at the mouth of the river Bug. According to their son, the couple took shelter in their basement just before dawn. After an initial blast just 50-60 meters along their street; a second missile plunged through the house around 15 minutes later, detonating near where they sat.

“Everyone strongly advised me not to see them," Vadaturskyy said of his parents bodies. At the funeral in Mykolaiv, artillery fire rumbled in the distance. The city’s docks, the heart of Nibulon’s grain transport empire, he found as silent as a graveyard. “So many times I tried to convince them to move to the western part of the country."

Putin’s threats worry NATO as sign of Russian desperation

At 74, the older Vadaturskyy had become a larger-than-life figure in Mykolaiv and across Ukraine. Though a tough player in an often corrupt industry, he was widely admired for investing heavily in the company he owned and never moving its headquarters — or his own home — to more glamorous, tax friendly, locations abroad.

In the 2000s the Vadaturskyys turned their closely held company into the backbone of Ukraine’s agricultural infrastructure, a huge network of grain silos, elevators, barges and ships capable of bringing grain from fields around the country to the Black Sea and beyond. Though a significant grower in its own right, with 75,000 hectares under cultivation when the war broke out, Nibulon was exporting more than 10 times its production. The company spent $600 million on a new 82-vessel fleet, Ukrainian flagged, built in Mykolaiv and now largely marooned there.

Developing the Dnipro River as a logistics artery for grain reduced farm-to-port transport costs to as little as $3 per ton, according to the company’s new sole owner and CEO. He and his father had dreamed, he said, of extending their river route north through Belarus and out to the Baltic Sea. 

But with the Black Sea ports blocked and the Dnipro cut at Kherson, where Russian forces occupy both sides of the river, Nibulon’s business model has been a major casualty of the war. To get grain to Ukraine’s much smaller Danube River ports, and from there to Constanta in Romania, now costs $154 per ton. 

Oleksiy Vadaturskyy was trying to do something about that. The morning before his death he visited the construction site for a new grain terminal he decided to build at Izmail, on the Danube, in response to Russia’s sea blockade. The goal, says Andriy, was to create a viable logistics route for Ukraine that wasn’t dependent on its Black Sea ports. 

The terminal opened for business in September and, even if the war ended tomorrow, would offer a valuable insurance policy against future Russian actions, says Andriy. He is also now considering how to transfer his river-cum-sea barges to the Danube, to run grain upstream and into the European Union.

A Russian speaker from a town whose massive docks had formed the heart of the Soviet ship building industry before the union’s breakup, Oleksiy Vadaturskyy developed a strained relationship with Moscow over years, as he reoriented his business to Ukraine and Europe. 

By 2009, according to Andriy, Nibulon had ended all business dealings with Russia. In 2014, when Russia annexed Crimea and fomented an insurgency in the eastern Donbas region, the elder Vadaturskyy took a strongly pro-Ukraine position. In 2018, Russia placed him under sanctions.

“Many people here looked to him for an example," the 49-year-old said of his father, not least because his parents had remained in Mykolaiv throughout regular bombardments, despite having the means to seek safety anywhere in the world. 

At $416 million, Nibulon’s direct losses from the war have been significant, whether through the 20,000 hectares of its farmland now under occupation or rendered unusable by the conflict, the grain stores it says were stolen by Russian companies or — accounting for about half the total — Moscow’s blockade of Ukraine’s river and sea traffic. 

From a record 5.6 million tons exported in 2021, the company’s volumes were down 88% in the March-August period. Forty percent of Nibulon’s 6,000 prewar staff have still been unable to work, either because they’re fighting at the front, in now-occupied territories, or displaced.

Even so, Vadaturskyy remains optimistic about the company’s future. As he spoke, he was about to present a case for staying the course to some of the 29 banks — from commercial institutions to international financiers like the European Bank for Reconstruction and Development — that have funded some of Nibulon’s $2.3 billion in investment since its creation.

Vadaturskyy doesn’t expect Putin to renew the grain export deal next month, but he also hopes to be proved wrong. The arrangement, brokered by the United Nations and Turkey, allowed Ukraine to raise grain exports from a trickle in March to 2.8 million tons in the first 21 days of October, nearing last year’s 3.1 million ton figure for the same period. Most of that goes by sea, making the traffic essential to the survival of Ukraine’s farmers — and not just Nibulon.

“If the green corridor is closed big and small farms alike will go bankrupt, everyone understands that," says Viktor Bykov, CEO of Tecom Agro Group Ltd, an agricultural company that leases 26,000 hectares of farmland in and around the Odesa region. 

Bykov included his own company, even though its location — close enough to the Danube to reduce transport costs, and far enough from the frontlines to have lost no land to occupation or shelling — puts the group in a stronger position than most.

In recent days, Russia’s number two at the UN, Dmitry Polyanskiy has told news outlets he was pessimistic about the grain deal’s prospects, because even though it lifted sanctions on Russia’s own grain and fertilizer exports, Western buyers have shunned them. He also threatened to break off cooperation with the UN, the deal’s broker, if it proceeds with an investigation into Russia’s use of Iranian drones in Ukraine.

What Is a ‘Dirty Bomb’ and why Is Ukraine worried?

Still, in a war Putin has pitched to the developing world as a struggle against Western domination, he could settle for the disruption caused even with the grain deal in place; ending it would risk turning more nations against him, driving global prices for wheat, sunflower oil and other food staples back to the stratospheric levels seen in May.  

The continuing backlog can be seen on the main road north from Odesa, where hundreds of grain trucks are parked in both directions, lining the kerb for miles as they wait for the call to take their cargoes for loading at one of the area’s three seaports. According to the Joint Coordination Center that manages the deal’s laborious vessel checks, as of Oct. 24 there were 113 ships registered for inspection, with a further 60 waiting in Turkish waters.

“The grain corridor is a political instrument on a daily basis," says Vadaturskyy, speaking at the offices he took over from a defunct travel company in central Kyiv. He says he moved Nibulon’s headquarters and staff from Mykolaiv for the first time since the company was set up, in the interests of safety and the greater efficiency that comes with not having to sleep in bunkers. 

“It’s very difficult to rely on it and it’s very difficult to trade forward," Vadaturskyy says of the grain deal, referring to the need agricultural businesses have to project future demand, so they can plant and buy in supplies accordingly. Just one missile, hitting one ship in an alleged accident would be enough to end the trade by making the route uninsurable, he says. 

Only a return to market conditions can ensure a true recovery, but even then Nibulon “is not going to be the same as before," Vadaturskyy says. “It won’t be the same as before my father was killed."

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This story has been published from a wire agency feed without modifications to the text.

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Published: 25 Oct 2022, 09:17 PM IST
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