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  • Writer's pictureRichard Murff

All That Grain

The Hidden Costs of a Black Sea War

Black Sea
Muskva - Moscow Claims It Has No Idea...

The Russian Ministry of Defense is so starved for anything resembling a victory, or at least not a humiliating failure, that they have announced firing on the Palau-flagged Sukru Okan on its way to the Danube River port of Izmail. The attack was with AK74s and other small arms fire, not anything to sink a container ship. Not to mention that Palau, a tiny chain of islands in Micronesia, has done nothing to anyone. The message seems to be not to mess with Mother Russia, because they are really gonna do it…. Without, of course, actually doing it. Or perhaps a fiendish trick the West into doing it for them. Remember, Chess is a national sport in Russia.

The Sukru Okan may be fine, but its insurance rates are ruined and that’s poses its own danger. From 1950 to 1975, there had been not one attack on shipping – zero. That's what the US Naval security umbrella had brought the world. Naturally this Pax Americana meant that insurance companies didn't really plan for a lot of claims on shipping losses. Then came the badly named Whirlwind War, the Iran Iraq War that lasted most of the 1980s (which I covered in Pothole of the Gods, 2021). After a few years, the war was a stalemate, so both sides started lobbing rockets at each other’s shipping. For all the fury, only about a dozen ships sunk, and perhaps 50 or so were actually disabled. Neither one of these countries were economic powerhouses, and Shatt Al Arab not much of a waterway, so in terms of global shipping, this was barely a rounding error.

What happened next, though, was almost a financial meltdown. The insurance companies were suddenly paying out on claims that assumed with nearly inconceivable and nearly went under, they and filed claims with reinsurance companies, who were also caught with their pants down, so were the bondholders making all this insurance possible. Had Ronald Reagan not sent the US Navy to escort all non-Iranian shipping in the Persian Gulf, the world was looking at a cascading financial… unpleasantness, brought on not because so much shipping was being sunk, but because the financial instruments that made them possible were imploding. Reagan also re-flagged ships as American because the Ayatollah may have actually believed that he was the 12th coming, but he wasn’t about to square off with the Gipper down here on Earth.

Circling back to the Sukru Okan, the Black Sea is becoming a no-go war zone, not because Mother Russia says so, but the insurance companies do. In last year alone, the Black Sea has seen a drop-in traffic of nearly 30% and this was before they started firing on international commercial shipping. Raising the question of whether we should enact US Naval escorts. Well, we aren’t going to, not in this climate, but NATO might. It should.

Admiral James Stavridis, former supreme commander of NATO, suggested that the alliance is now considering a humanitarian mission to escort Ukrainian grain to the world in order to prevent mass starvation. The move puts China in a tricky position – which is starting to see that an export-dependent economy on the skids probably ought not try to fight its top two trading partners – The US and EU - at once. Besides, a lot of the Ukrainian grain Russian strikes have destroyed was for China. Either way, the question is moot unless Turkey allows warships through the Bosporus Strait into the Black Sea. They might, they're a little less fussy about NATO these days.

All of which might lead to NATO and the Russian Navy squaring off, but it’s unlikely. Right now the vaunted Russian navy, still sore at losing its flagship Muskva, is keeping a wide berth pretty much anyone but sailors from Palau.


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