The sea as a way to the restoration of Ukraine: shipping logistics in wartime

Arthur Nitsevych
Interlegal, Odesa
www.interlegal.com.ua

The war in Ukraine has dramatically changed the country’s logistics map. It has: destroyed old routes; called into question the reliability of the infrastructure; forced businesses to look for new models of work, in some cases to build supply chains from scratch; and meant constantly having a plan B, C, and so on, ready. Shipping logistics, which before the full-scale invasion was a key to agricultural and metallurgy exports, have now plunged into a deep crisis due to the suspension of shipping in 2022. Today, when, thanks to the Armed Forces of Ukraine, Ukrainian ports are working again, it is still undergoing a painful but necessary process of transformation.

How exactly rules of the game at sea have changed, the new challenges that have arisen for Ukrainian shipping, charterers and other market players – all these issues were discussed at one of the panels of the Ukrainian Transport Forum 2025, organised by the Association of International Freight Forwarders of Ukraine (AIFFU) in partnership with the European Business Association (EBA) and Maritime Days in Odesa (Interlegal). The Forum gathered over 200 key players in the Ukrainian transport market, namely representatives of the government, business, international organisations, forwarding companies, ports, railways, shipping industry, logistics operators, lawyers and insurers.

This article shares a brief overview of the maritime logistics market based on the reports of the speakers of the third section of Ukrainian Transport Forum 2025, which was moderated by Interlegal partner Arthur Nitsevych.

There is grain, there is demand: logistics shall rule

For a Ukrainian agricultural exporter today, every deal is a whirl of prices, freight and deadlines. But the main thing is that Ukraine has grain, for which there is a stable demand. Delivery channels are needed.

Daria Marchenko, a commodity broker at Atria Brokers, emphasised this aspect and immediately set the right tone for the discussion: despite the war, prospects for agricultural exports for the current season are more than encouraging, therefore, logistics should rule and facilitate optimal conditions for export.

‘Last season, we have already shown that we are able to play on all fields: we exported approximately 30 million tonnes of grain to over 70 countries. Although geography is a little narrower than in the pre-war period, the main directions remain stable:

• European Union – 44 per cent of the whole export volume. The main importing countries are the Netherlands, Spain, and Italy.
• North Africa – 34 per cent. The largest importers are Egypt, Algeria, Tunisia, where Russia is the main competitor with Ukraine.
• Asia – 21 per cent. Bangladesh, Indonesia, Vietnam, China – here too, our unfortunate neighbour often competes with us.’

But the 2024/25 season began with new rules, especially on the European side. In June, the European Union fixed tariffs on import of Ukrainian wheat: now Ukrainian exporters can export only 580,000 tonnes duty-free. This means that over 3.5m tonnes should be urgently reoriented to other markets.

Meanwhile, there are also growth points. Indonesia, Bangladesh and Vietnam are already buying Ukrainian wheat under forward contracts. Active demand from government procurement is expected from Egypt, Tunisia, Algeria. In China there was abnormal heat and drought in the summer of 2025, which could significantly increase the demand for barley. Turkey is opening a window for export of nearly one million tons of wheat, due to changes in domestic trade policy within the country.

Turkey is also demonstrating stably high demand for Ukrainian corn. India is also potentially ready to purchase up to 0.5m tonnes of the queen of the fields. The European market for Ukrainian corn will be more competitive due to cheaper offers from the United States, but it is expected to maintain a high level.

‘Summing-up, we see a truly optimistic picture of the new season. There is grain, there is demand, so export is a must. The prospects are more than encouraging, the weather is favourable, price and logistics factors facilitate excellent grounds for active trade. All we need now is to work quickly with those who truly understand the market.’

Freight fluctuation 

The freight market is a clear and very tangible marker of how the war affected shipping logistics in the region. Igor Kolomiitsev, director of Danton Shipping, points out that before the full-scale invasion, freight rates for 5,000 tonnes of grain from the Izmail to the Sea of Marmara fluctuated within US$18-25. But in 2022 everything changed: only the Danube ports remained open, while the freight increased up to US$105-110.

‘Imagine: from 18-25 to over 100. Among the first “kamikazes” who went to Ukraine for money was Arab rusty tonnage. They were the first to call at the Danube ports. Turkish ships followed them. Then Ukrainian ones – with our own crews. Later the problems arose: some of the crew members were mobilised, they were not allowed to leave anywhere. Over time, the market began to stabilise. But at its peak, ie, by late 2022, the rates really reached US$105.’

Following the launch of the first and second grain corridors, seaports reopened and the rates began to decrease. The Danube market, which was formed during the war, began to lose its positions. Now freight rates are even lower than they were before the full-scale war:

‘Last year, there was no seasonal increase in prices, which usually occurs from the beginning of the harvest till Catholic Christmas. The market is depressed. There are even cases where shipowners sent vessels into lay-up due to financial problems, eg, when operating costs exceed the time charter equivalent. This is briefly about what is happening to the freight market now.’

Are foreign shipowners bypassing Ukraine?

Unfortunately, the answer to this question is still yes. Maksym Khaulin, director of the Intresco shipping company, states that foreign shipowners are still afraid to enter Ukrainian waters due to military risks, such as the danger of mines.

Private operators often choose safer routes through the Romanian, Bulgarian, and Turkish ports. For the trading to Ukraine they mainly use adapted vessels or those that have no alternatives on the international market.

As the speaker notes:

‘These are outdated Syrian and Turkish vessels with a deadweight of up to 30,000 tonnes. More or less normal companies have vessels with a deadweight of over 30,000 tonnes, but half of them call at Russian ports: this is not a secret for the market. There are no checks or control over them at all.’

Problems with logistics in Ukrainian ports are also noticeable. In fact, now only three ports of the Greater Odessa area are operating in Ukraine. They bear all the load, cargo flows, rail transport.

However, Maksym Khaulin highlights also positive signals. Due to launch of the so-called Grain Corridor 2.0, the Ukrainian market is gradually regaining its attractiveness for shipowners:

• Operators are gradually returning, especially to the Danube, with infrastructure operating in Reni, Izmail, Orlivka, Ust-Dunaisk, Vilkovo. But there are hardly any cargoes.
• Thanks to the Ukrainian Navy, insurance premiums are decreasing. At the beginning of the war, they were three-to-five per cent, now they are 0.5 per cent.
• International operators also got interested. Today we heard about Maersk. One more line was launched by Medkon Lines.

Private fleet: in the stage of tactical survival

Maksym Khaulin believes that under conditions when foreign shipowners, despite all the positive signals and market efforts, still bypass Ukrainian ports, Ukrainian private shipping is becoming the key to the economic stability of the country. However, without systematic approach and state support, it will not survive and even will be unable to become competitive at the international level.

‘Private shipping in Ukraine is in the phase of tactical survival, where business is looking for flexible solutions, but already needs a systematic approach. Without regulatory quality and state support, its further development is problematic. However, the Ukrainian market has unique logistics capabilities due to which it may transform into a regional hub, provided that a targeted policy is implemented.’

Today, most of the Ukrainian private fleet consists of outdated river vessels over 20 years old, not owned by specialised carriers, but by agricultural, logistics, and trading companies that were forced to invest in shipping due to the lack of stable carriers. In fact, they have no state funding and lack access to insurance, furthermore, service and repair infrastructure is limited due to the war and associated risks.

Maksym Khaulin points out that before outbreak of the war many vessels got repaired in Ukraine, followed by calls to Berdyansk, Mariupol and Crimea for loading. Now all it is lost.

‘The existing fleet is operating at the limit of its capabilities, lacking renewal and investment while facing high insurance risks. The question is how to survive, not how to develop.’

No funds, no guarantees 

There were no state programmes to support the private fleet, even before the outbreak of the war. After 2022, banks stopped financing. Not every shipowner can update the fleet or purchase a new vessel with its own resources.

In Ukraine there are no specific forms of leasing. The banks that worked before the war, such as OTP Bank or First Ukrainian Bank, have now stopped these programmes.

Neither before the war nor now have there been any affordable loans for updating the fleet. All such loans, for example, for Ukrainian Danube Shipping, were taken out abroad. There were small schemes with state banks. But this does not suffice for the renewal of a large-scale fleet.

Improvisation as a solution

Besides the outdated fleet and lack of state support, Ukrainian shipowners face mine danger in the Black Sea, the high cost of cargo insurance and for calls in Ukraine, regulatory barriers and bureaucracy, a sharp decrease of cargo flows in the Danube ports due to the war. Such factors force businesses to improvise and cause harm to efficiency.

But the Ukrainian business does not give up. It looks for solutions on the go, adapts, unites – someway it mirrors the Ukrainian military, in the opinion of Maksym Khaulin:

‘Ukrainian business is creative, like the Armed Forces of Ukraine. But given the constant improvisation it is impossible to build up a strategy.’

Solution No. 1: foreign flags. Ukrainian shipowners register vessels under the flags of other countries, such as Moldova, Romania, etc. This is the only way to work under foreseeable conditions. 

Solution No. 2: cooperation. Companies are uniting to share fleets. For example, Nibulon and the Danube Shipping Company share tugboats, small-class barges for cabotage on the Danube. Various alliances are being created between businesses in order to optimise routes and fleets.

Solution No. 3: reorientation to military cabotage. Some shipowners are reorienting themselves to internal transport in the framework of military logistics, if funding is available.

Solution No. 4: investment in one’s own vessels. This is a luxury for those who have their own resources – not every company can afford it. Because, as already noted, the Ukrainian private fleet is currently owned by farmers and traders who spend most of their funds on their own trading purposes, such as grain purchases, taxes and duties.

Resuscitation of Ukrainian shipping requires clear rules of the game

The once large sea and river fleet of Ukraine has practically disappeared today due to privatisation, corruption and lack of renewal. Maksym Khaulin believes that resuscitation of the Ukrainian shipping is possible and profitable. However, it requires not only funds, but also clear and understandable rules of the game:

‘Today, Ukrainian shipping consists of a few dozen private operators, mainly in the river segment. There is a chance to restore it, either through investments in the river fleet, or through re-opening of the Dnieper and Danube, or through public-private partnerships. However, this requires a fair end to the war. Otherwise, it will be impossible to transport via the Dnieper.’

Restoration is possible, if:

• preferential lending or leasing for purchase/modernisation of vessels is available;
• stable rules of the game are established, such as simplification of registration, tax incentives, VAT refunds;
• a guarantee mechanism is launched to cover military risks (eg, public-private insurance).

Strategy instead of response: what business expects from the regulator

Maksym Khaulin notes that Ukrainian shipowners do not require special treatment, only stable conditions that will facilitate operation and planning:

‘Business does not ask the state for privileges. It asks for predictability and access to development tools operating in Europe.

‘We need transparent rules for fleet registration. Many companies bypass the Ukrainian flag due to the complexity of the procedures.

‘We need to simplify licensing procedures, in particular, for temporary cabotage, access to port infrastructure and privileges for vessel import.

‘We need tax incentives, financing and guarantees, engagement of the state in joint programmes for insurance and subsidies for the new fleet. We also need certainty in maritime and military transport policy for at least five-to-ten years ahead. Neither 30 nor 50, but for at least five.

‘If we want the Ukrainian flag to be at sea again, we need a strategy, not just a response.’

Self-shipowner

Wartime logistics risks are forcing businesses to look for new ways aimed to facilitate supply stability. Large system companies that previously only chartered vessels are now increasingly investing in their own fleet. Volodymyr Kozakevych, director of AP Marine, a logistics and transport subdivision of Agroprosperis agricultural holding company, notes that for Ukrainian agribusiness this is not so much a desire to expand the scope of its activities as a desire to manage logistical risks arising in the process of cargo export from Ukraine.

Agroprosperis as one of the largest agricultural producers and traders in Ukraine, before the full-scale war already owned a powerful fleet of 500 of its own and 500 leased wagons and had a river fleet. After 24 February 2022, the company invested in road transport and got more focused on the Danube. In late 2024, it acquired its first river-sea vessel and now plans to expand the fleet with a second one.

For players such as Agroprosperis, having their own fleet is the main guarantee of fulfilling contracts in wartime. But operating a ship in Ukraine is not easy even for such a large business.

Vessels worth their weight in gold

Volodymyr Kozakevych notes that tax burden on vessel import remains a serious problem for Ukrainian companies planning to invest in their own fleet. Their own fleet must be purchased abroad, while tax burden on the vessel is a quarter of its cost: duty at five per cent, VAT at 20 per cent.

‘Of course, we pay the duty irrevocably and take it calmly. This is not the time to be capricious – the state also needs funds.’

He also highlights that the logic of the import duty is to protect the national manufacturing; since Ukraine does not produce a large-tonnage marine fleet, it is unclear why such a fee applies.

A more tangible tax burden is 20 per cent VAT. It falls on credit and requires availability of working capital. It is especially difficult for shipowners who have no other operations in Ukraine: they are to apply for reimbursement, which is a long and complicated procedure.

‘If the company is a VAT payer, as in our case, then the situation is somewhat simpler – VAT is reimbursed within a year, a maximum of one and a half. That is, this is a temporary burden, but it is there.’

Crew factor 

One of the largest challenges for a shipowner whose ship calls at Ukrainian ports is the safety of sailors on board. Volodymyr Kozakevych states that no insurance removes moral responsibility for a crew working in a combat zone:

‘With the crazy rates that I pay to the insurance company for every vessel call, I am not nervous about the vessel; let the insurance company be nervous.

‘What I am worried about is the crew. Of course, not all crews are able or willing to call at Ukrainian ports; some are simply afraid to do so. Here the keystone is personnel. We solve this issue by selecting experienced sailors. For example, 30 per cent of our crew have experience of drone attack on the vessel, experience of military seizures. But fortunately, they gained all this experience not on board of our vessels, not in our country, but somewhere in the Gulf of Aden, in the Philippines and in other pirate zones.

In fact, the world is unsafe, and Ukraine is not the only place where ships are afraid to call. In fact, it is probably not even the most dangerous.’

Regulation or abuse?

Ukrainian legislation quite adequately regulates standard voyage charters under which payment is calculated according to the amounts carried. However, more complex instruments, such as bareboat charter, time charter, hedging and other financial mechanisms that are common to the global shipping market, in fact are not regulated or are poorly regulated in Ukraine. Therefore, business is forced to apply general rules that do not meet specifications of shipping industry.

Volodymyr Kozakevych complained, if shipowners can still cope with taxes amounting to a quarter of the asset value, regulatory gaps sometimes simply make it impossible for business to operate:

‘If one starts to deviate even slightly from standard terms and conditions of voyage charter, in Ukraine nothing at all is prescribed for shipping business. Only some general rules apply that cannot be imposed on either the vessel herself or the shipping business in any way. It turns out that one does not seem to be violating anything, but the tax burden is already such that it is impossible to reimburse it at any crazy rates.

‘This is simply a disregard for business compared to Greece, Bulgaria, or any country with proper maritime industry regulation.’

The expert is sure: ‘if we ask the question of how the state could help a Ukrainian shipowner, the answer is legal certainty and adaptation of legislation to shipping business and up-to-date realities.’

Three years before the outbreak of the war, the Ukrainian river business players reached the level of systemic dialogue with the state. Working committees were organised at the ministry, where business entities, jointly with government representatives, purposefully worked on updating the legislation, not to avoid taxes or responsibility, but to have clear and understandable rules of the game.

These working groups were attended not only by experts from the ministry, but also by the ministers themselves, their deputies, and, if necessary, by representatives of other departments. It was a real dialogue, and it yielded results. Unfortunately, this process was interrupted by the war. But these three years show a bright example of how the state and business can work together effectively.

‘I hope we will return to such scheme when the war is over. We should not give up, we should just come up with specific proposals, return the practice of working groups under ministries and adapt the legislation step-by-step.’

Charter party in the crosshairs: legal risks for charterers

Following the full-scale invasion, the issue concerning fulfilment of obligations under charter parties became acute for market players. Lawyers received lots of inquiries on whether it was possible to cancel a charter party, to suspend its execution, or whether there were grounds to declare force majeure or frustration of the contract. Legal discussions arose regarding an option to refuse a vessel calling at a dangerous port and under what conditions a port can be treated as dangerous in general. Interlegal partner Karyna Gorovaya noted that arbitration proceedings concerning such issues are still ongoing:

‘Most charter parties are governed by English law. The doctrine of force majeure does not apply by law. It will only apply if and to the extent the parties have incorporated a force majeure clause into charter party.

‘Frustration is somewhat similar to force majeure: it also occurs when certain circumstances arise and are out of the person’s control and make it impossible to perform the contract. However, its consequences are somewhat different: in case of frustration, the contract is discharged in full. This category, unlike force majeure, is provided for by English common law, but is used extremely rarely due to its complexity.’

Special attention should be given to the right of deviation, that is, deviation of the vessel from its route. Even if this is not provided for by the charter party, the war risk rules allow for such a possibility in case of actual threat. But the key condition is that the deviation should be reasonable: only if there is a danger to life of the crew or to the cargo on board.

Legal disputes concerning cancellation of charter parties due to the danger of the port of destination are difficult in practice. One of the charterer’s key obligations is to nominate a safe port of call. If the port is treated as dangerous, in particular, due to hostilities, charter parties usually contain a clause to the effect that the shipowner may demand changing the port or declare cancelling the charter party.

However, Ukrainian Black Sea ports are now dangerous by default. Does the shipowner have the right a priori to reject the charter party and cancel it at any time?

Logically, no, because the war has been going on for four years and all market players are well aware of the threats to Ukrainian sea ports. However, in practice everything depends on circumstances. One example is the case conducted by Interlegal team. It concerned a charter party for a voyage to Izmail. The shipowner cancelled the contract, invoking the danger and the crew’s reluctance to enter the port. Although the shipowner fully understood the risks at the time of entering into the charterparty, the arbitral tribunal supported its position.

The award was based on the fact that since the signing of the charter party, the safety situation in Izmail had significantly deteriorated: when Russia withdrew the Grain Deal and significantly intensified shelling of port infrastructure. As a result, the arbitrators recognised that circumstances had changed to the extent that the shipowner has the right to cancel, while the charterer’s losses are not subject to recovery.

The dynamics of threats can radically change the legal assessment of a situation. That is why it is important to prescribe the most specific conditions in the charter party regarding war risk, deviations and force majeure, adapting each contract to actual risks.

Karyna Gorovaya summarised:

‘Read your contract. Watch what you are signing. It is even better to draft the contract yourself, to incorporate the necessary clauses therein. No one knows your risks and your business better than you.’

Today Ukrainian shipping logistics relies on enthusiasm, adaptability and business intuition. But survival is not a strategy. For Ukrainian shipping logistics to be competitive and to remain a reliable support for agricultural exports, systemic changes are necessary: updating legislation, state support for shipowners, a clear and consistent policy for the development of the industry. War has already changed the rules of the game, it is time to change the rules of regulation.