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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK is on course for “sluggish” growth that will lag most of its G7 peers, alongside a higher rate of inflation, according to a downbeat economic prognosis ahead of Thursday’s local elections. Gross domestic product will increase by 0.4 per cent in 2024, a softer expansion than in any other G7 economy apart from Germany, before growing by 1 per cent in 2025, the OECD said in its economic outlook.Inflation will run at 2.7 per cent this year, the highest pace in the group of nations, according to the Paris-based forecaster, before receding to 2.3 per cent in 2025.UK Prime Minister Rishi Sunak is counting on robust GDP growth this year and slowing inflation to deliver a morale boost to the electorate as he attempts to curb the opinion poll lead of the opposition Labour party. Elections are being held in 107 local authorities in England on Thursday, alongside a number of other votes including mayoral elections. A UK national vote is expected by the end of the year.Chancellor Jeremy Hunt last month told the Financial Times that the prospect of Bank of England interest rate reductions this year, plus recent reductions in national insurance contributions, would “be felt in people’s pockets” by autumn. He added: “That’s clearly something that is significant for us.” He hinted at further reductions to taxes before the general election, if there was budgetary capacity to do so. But the OECD’s UK growth forecast, which was a downgrade from its February prediction of 0.7 per cent expansion in 2024, comes after a similarly downbeat assessment by the IMF, which last month trimmed back its outlook for the UK. While the UK is on course to exit a shallow technical recession recorded in the second half of last year, the OECD found that consumers would be held back by “sticky” services prices inflation and a rising tax burden. “Soft external demand will constrain trade growth, and policy uncertainty will impede business investment,” it added.  With the Bank of England’s Monetary Policy Committee due to convene next week to set rates, the OECD predicted the central bank would start cutting its key rate in the third quarter of the year, taking it from 5.25 per cent to 3.75 per cent by the end of 2025. This will begin to alleviate pressure on living standards, but the organisation warned that households would at the same time see a rising tax burden, heading towards historic highs of 37 per cent of GDP this decade. This is because the decision to lop four points off the main rate of national insurance “only partially offsets the ongoing fiscal drag from frozen personal income tax thresholds”, the OECD said. With Hunt hinting at further cuts to personal taxes, the organisation urged the UK to persevere with consolidation to “rebuild fiscal buffers” as it predicted public debt would hover above 100 per cent of GDP in 2025. “Fiscal prudence is required as inflation remains above target, and spending is to be directed towards supply-enhancing investment, including infrastructure, the National Health Service and adult skills,” the OECD recommended.Responding to the forecast, Hunt said the outlook was unsurprising given the priority has been to “tackle inflation with higher interest rates”. “But now we are winning that war,” he said. “To sustain that we need to stick to our plan — competitive taxes, a flexible labour market and far-reaching welfare reform.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an onsite version of our Unhedged newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersGood morning. The FT’s Eric Platt, along with our data team, has published a terrific read on Berkshire Hathaway and whether its heirs apparent can pick stocks as well as Warren Buffett. Read it; it is a great piece of reporting, and a good demonstration of how hard it is to assess what is going on inside the last great American conglomerate. I will weigh in after the rest of the series is published. Meanwhile, email me your thoughts: robert.armstrong@ft.com. The Frozen FedYesterday, I wrote that the Federal Reserve was “stuck”, with “no choice to await an improvement in the data before cutting rates”. It turns out “stuck” was, if anything, too weak a word. The Fed, on the evidence of yesterday’s statement and chair Jay Powell’s press conference, is utterly frozen between two poles, unable to even gesture in either direction.On one side, the central bank wants to be absolutely clear that there will be no cuts until the news on inflation improves. This was made clear in the statement. The phrase “lack of further progress” was right there in the first paragraph. In the second paragraph the point was hammered home by a shift from the present continuous into the present perfect . “Risks . . . are moving into better balance” was the message in the March statement. Now the risks “have moved towards better balance over the past year”. Progress, the Fed acknowledges, is drifting into the past.On the other side, Powell is not coming within commuting distance of the idea that a rate increase might be needed. Various reporters tried to push the chair into admitting the possibility. He wasn’t having it: nothing, repeat nothing, in the current situation is suggestive that higher rates are required, he insisted.What justifies his confidence that policy is already tight enough? Two things. First, the labour market continues to loosen. Powell mentioned Wednesday’s Job Openings and Labor Turnover Survey, which showed job openings falling to a three-year low, as well as worker and employer surveys showing that it is easier to find workers and harder to find jobs. Next, Powell is keeping the faith that rent inflation on new leases has fallen, and that this will show up in official measures of housing inflation, which are tilted to older leases, eventually. He remains confident it will happen, he says. Only the timing is less certain now. Unhedged is less confident.The most interesting moment of the conference — which was, overall, a monument to stasis — was when a reporter asked if the loosening of financial conditions had contributed to 2024’s strong growth (and stubborn inflation). Translation: did you dopes do this to yourselves, by pivoting towards loosening so dramatically back in December? Powell said that growth had not accelerated this year, it has only continued, and that the exact causes of inflation were hard to sort out without the benefit of time passing. The fact this answer was probably true did not make it any more satisfying.A peripheral note. Powell was asked a question that is the subject of much Wall Street speculation: whether, for political reasons, cutting rates will get harder as the November election approaches. He replied that it did not. He and his colleagues would do what they thought was best for the economy, whatever the timing. I think this is true, and not because Fed officials are less political than the rest of us. I just don’t see the incentive for a member of the monetary policy committee to bend over backwards to appear apolitical, or to act to please one party or the other. The reputational risks involved in playing that game seem much greater than the gains to be had by winning it.Starbucks and the other tiny horsemen of the economic apocalypseThis newsletter has noted on several occasions that poorer consumers are suffering distress that is absent elsewhere in the economy. This makes perfect sense. Inflation and the sharp rise in interest rates will have little effect on a household with more assets than liabilities. The ballooning value of the former will make up for the higher cost of the latter. But if your net worth is negative, the big increase in the cost of your car or credit card loan is going to bite.The question has always been whether, over time, problems will creep upward into higher income brackets, creating a larger drag on the aggregate economy. Enter Starbucks’ first-quarter earnings report, which was bad enough to send the shares down nearly 16 per cent yesterday. It was, as far as I know, the first properly shocking first quarter earnings report from a large consumer-facing company. US same-store sales fell 3 per cent. The average revenue per visit rose 4 per cent, but there were 7 per cent less visits. The company’s CEO said:We continue to feel the impact of a more cautious consumer, particularly with our more occasional customer, and a deteriorating economic outlook has weighed on customer traffic, an impact felt broadly across the industry. In the US, severe weather impacted both our US and total company comp by nearly 3 per cent during the quarter.I do not know which I find less convincing, the familiar weather excuse or the claim that there was a “deteriorating economic outlook” that shows up in so few other places (Mastercard reported yesterday too; transaction volumes on its US networks were higher in the first quarter of this year than the last quarter of 2023). But if one were looking for evidence that higher rates were finally pinching the American middle class, it would be hard to find a more poetic example than a declining propensity to pay $7 for a cup of coffee. And Starbucks is a big, important company.So we place Starbucks in a column alongside the declining consumer confidence surveys, a slightly weaker ISM manufacturing report, and a gently softening jobs market — all recent evidence of a nascent slowdown. Overall, the US economy’s balance sheet still looks pretty good to Unhedged, but we are keeping an eye on it.One good readHow to handle a campus protest (and how not to).FT Unhedged podcastCan’t get enough of Unhedged? Listen to our podcast for a 15-minute dive into the latest markets news and financial headlines, twice a week. Catch up on past editions of the newsletter here.Recommended newsletters for youSwamp Notes — Expert insight on the intersection of money and power in US politics. Sign up hereDue Diligence — Top stories from the world of corporate finance. Sign up here More

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President Joe Biden was hoping for a lift from the Federal Reserve this year. On Wednesday, the Fed dealt those hopes a blow.Jay Powell, the central bank’s chair, confirmed what many have suspected for some time: interest rate cuts in the world’s biggest economy are not imminent. The economy remains too hot to start loosening monetary policy and the Fed’s mission to beat inflation back to its 2 per cent target is not complete. The high borrowing costs American voters complain about are likely to linger at least until November’s presidential election. It marks a dilemma for Biden and Powell. The US economy is strong: humming along at a pace above those of other advanced economies, and close to full employment. But that strength is a big reason why the Fed is likely to leave rates higher than voters, or the president, would like.The Federal Open Market Committee admitted as much on Wednesday in Washington, noting it had made little headway in recent months towards hitting the central bank’s inflation goal. The language in its statement all but ruled out a cut in June, when the Fed meets next. High rates would “need more time to do their job”, Powell said, and it would “take longer” for rate-setters to be confident enough to begin cutting them — words that immediately cast doubt on cuts in July too. It leaves the world’s most important central bank in an awkward position ahead of an election between Biden and Donald Trump. Rate cuts late in the election campaign could appear to favour Biden. Not cutting might help Trump.Powell was adamant in his post-meeting press conference that the central bank’s rates will not be set according to this year’s political calendar. That leaves a cut at September’s Fed meeting in play — though analysts believe that the move would come too close to the vote on November 5. “It’s going to be right in between two presidential debates,” said Vincent Reinhart, chief economist at Dreyfus and Mellon, referring to the September 18 FOMC vote. “The FOMC, appropriately, cares about the public reception to its actions. Around the time of an election, the public may be confused about its intent. You need to pick a spot where you’re sure the public will understand why you’re doing what you’re doing.” Heading into elections with the US’s benchmark borrowing cost at a 23-year-high range of 5.25 per cent to 5.5 per cent — and with mortgage rates and credit card interest levels far higher — would be a blow to Biden’s efforts to win over voters who think the economy was stronger under Trump.That the Fed has now been forced to leave rates higher for even longer is a grim reminder that, for almost all of Biden’s first term, inflation has been uncomfortably high. Price pressures have acutely affected the cost of food, energy and housing — goods that Powell on Wednesday referred to as “the fundamentals of life” — making inflation the number one economic issue facing the electorate by far. The Fed chair also cast doubt on whether the central bank would be able to pull off a soft landing, guiding inflation back down to 2 per cent without crashing the economy or inducing widespread job losses. Powell was “not giving up” on a Goldilocks scenario, he said on Wednesday. The arrival of more workers into the US labour market, for example — a benefit to the economy now overshadowed by political rhetoric about immigration — had helped subdue price pressures in 2023, he noted. It could “work to bring inflation down” this year too. The Fed chair remained upbeat, saying his “personal forecast” was that the central bank would make some progress towards 2 per cent this year, as rental costs stopped rising so quickly. Even so, he did not know the cooling would be “sufficient” to cut rates in 2024. “We’re going to have to let the data lead us on that,” he said. Those messages on Wednesday from the Fed all contrasted with more bullish forecasts it offered earlier in the year, which signalled that the soft landing was its baseline scenario. Yet for both Biden and the investors that follow the Fed’s every move, Wednesday’s dose of hard reality from the central bank could have been worse. A series of data releases pointing to higher-than-expected inflation had fed concerns among some market participants that the next move in rates could be up. Powell allayed those worries on Wednesday, saying rate rises to squelch the inflation uptick were “unlikely”. Stocks listed in New York rose initially, before falling later in the day. “Clearly the threshold to raise is higher than to cut, but both are high,” said KPMG US chief economist Diane Swonk.“The Fed is not confident about how quickly it can get inflation to 2 per cent, but it’s confident that rates are high enough,” said TS Lombard chief economist Steven Blitz. And Powell was also quick to point out that the Fed’s position on rates was a reflection of the strength of the US economy — a subtle dose of good news for anyone watching in the White House. Powell acknowledged the Fed would trail its counterparts on the other side of the Atlantic — such as the European Central Bank, which is set to cut in June — but only because the American economy was so much healthier than others. “The difference between the United States and other countries that are now considering rate cuts is that they’re just not having the kind of growth we’re having,” he said. “They have their inflation performing like ours, or maybe a little better, but they’re not experiencing the kind of growth we’re experiencing. “We actually have the luxury of having strong growth and a strong labour market, very low unemployment, high job creation, and all of that,” he added. “And we can be patient and we’ll be careful and cautious as we approach the decision to cut rates.” More

UK households have cut back on beer, bread, meat, recreation and domestic appliances since late 2021, according to a Financial Times analysis of official data that points to the impact of the cost of living crisis on consumption.Real consumer spending has yet to return to pre-pandemic levels in Britain, underperforming the US and eurozone, and contracted in the final three months of 2023, underlining the challenge Prime Minister Rishi Sunak faces in creating a feelgood factor in the economy ahead of the election. UK households slashed purchases of beer by 15 per cent, confectionery by 10 per cent, meat by 7 per cent, and bread and fruit by 9 per cent each in the two years to the final quarter of 2023, shows an analysis of detailed consumer spending figures from the Office for National Statistics and gross domestic product data.The trend partly reflects the impact of the pandemic, with consumers returning to spend more on services and less on goods, but it mainly captures weakening spending power stemming from higher prices. The rise in interest rates to a 16-year high has also hit household finances, pushing up mortgage costs and rents. Consumers spent 15 per cent more over the two years to Q4 2023, the latest quarter for which data is available, although they bought 0.5 per cent fewer goods. Household spending on gas surged by almost 70 per cent, but consumers bought 10 per cent lower volumes. The volume of food purchased by consumers was also 8 per cent lower, even as spending on groceries increased by 16 per cent over the past two years. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.“The cost of many essential items, such as energy and food, has risen dramatically in the past two years, and wages have not kept up with the large rise in prices. Given household budget constraints, something had to give,” said Tomasz Wieladek, chief European economist at investment company T Rowe Price. As a result, he added, “households had to cut back on many non-essential items such as goods and luxury services”, as well as on energy consumption, and switched away from more expensive branded foodstuffs. UK consumer price inflation peaked at a 42-year high of 11.1 per cent in October 2022, while real wages contracted for most of 2022 and 2023. Inflation dropped to 3.2 per cent in February, but prices remain about 20 per cent above their mid-2021 levels.ONS data shows inflation-adjusted spending on household appliances, such as coffee machines and dishwashers, dropped 19 per cent in the two years to the end of 2023 and was 8 per cent below pre-Covid levels. Real spending on furniture was down 9 per cent, with fewer purchases of cars, plants, jewellery and insurance. Spending on housing was affected by the property market downturn last year and the “race for space” at the height of the pandemic. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Overall, household real spending in the final three months of 2023 was 2.4 per cent below its level in the same period of 2019. This compares with an 8 per cent expansion in the four years to the end of 2019. British households fared worse than others, official data suggests. In the US consumer real spending rose 10 per cent from pre-pandemic levels in the final three months of 2023, and Britain’s performance was weaker than that of the eurozone and Canada. The sharper contraction in consumer spending in the UK “was probably largely due to the UK’s higher and longer-lasting inflation problem”, said Ruth Gregory, economist at research company Capital Economics, referring to UK prices rising faster than in the eurozone and the US last year. “The UK had the worst of both worlds, a big energy shock like the eurozone and worse labour shortages like the US,” she added. Wieladek said the hit to consumption mattered especially in an expected election year, because squeezed households would “blame authorities”. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.With the Conservative party about 20 points behind Labour in opinion polls, Sunak is hoping for better economic conditions to underpin his election campaign.Gregory said it made “sense for Sunak to wait as long as he can” before going to the country, adding: “The recession in the consumer sector may be over and the recovery will start to gather pace from the second quarter.” ONS data shows higher food and energy prices left little room for other purchases in the two years to the end of 2023: inflation-adjusted spending on personal care, which includes hairdressing and nail salons, dropped 4 per cent. Spending on recreation and culture also fell, including an 18 per cent decline for sports equipment and a 5 per cent drop for games and hobbies. Education and communication registered rises in real spending in the same period and relative to pre-pandemic levels, reflecting long-term shifts in consumption habits. Real spending on travel and restaurants rose compared with the end of 2021, but was still below its Q4 2019 levels. Mark Boyd-Boland, partner at consultancy LEK, said that in addition to cutting discretionary spending, consumers had “sought to moderate what they bought at the grocery store”, buying “a few less of the nice things” and downgrading to supermarket own-label items. Boyd-Boland said that while the point at which “household budgets will feel better” was approaching, the benefits of lower inflation would take “some time to come through because of the ongoing impact of the interest rate increases”. More

Maritime trade underpins Ukraine’s economy and the increase in seaborne exports via a newly established Black Sea corridor is giving Kyiv a badly needed financial boost and supporting its war effort.“In September, we were in single digit ships transiting the port of Odesa and surrounding areas,” says Arsenio Dominguez, secretary-general of the International Maritime Organisation. “In December and January, it went up to the levels of over 200 ships arriving and the same number departing each month. That’s where it’s being maintained.”The war with Russia is primarily land-based and it has not been going in Ukraine’s favour. Moscow’s forces are slowly pressing forward and the Russian air force has begun to exploit Kyiv’s shortage of air defences. Ukraine is in dire need of more men and the country faces a race against time to deploy the $60bn in US military aid passed in April.But Ukraine’s Black Sea success is of strategic and economic importance.Anti-ship missiles and sea drone attacks have had an outsized impact on Vladimir Putin’s fleet. Their combined threat has forced much of Russia’s navy to newly fortified ports on the eastern edge of the Black Sea, far from Ukraine’s coast, and shown that Kyiv can still operate aggressively.“The Ukrainians have spooked the Russians in the Black Sea,” says Daniel Fiott, assistant professor at the Centre for Security, Diplomacy and Strategy at Brussels School of Governance, with Moscow’s navy pinned back to what he calls their “more secure maritime bastion”.“That has really dented Russia’s ability to plan, coordinate and control transport routes [in the Black Sea]. I think that’s also one of the reasons why you have seen this uptick as well in grain deliveries.”Concerns for their own cargo vessels may also have deterred Russian missile attacks on Ukrainian commercial shipping.Both Russia and Ukraine have a vested interest in “having a Black Sea region that is safe for the traders to move shipments [of grain] in and out”, says Arnaud Petit, executive director of the International Grains Council, a London-based trade body, adding that grain exports provide “vital income” for Ukraine. “The Ukrainians have also shown that they could hurt the Russian shipping industry with these drones on the sea,” Petit adds. “I think each of them has understood that if there is trouble both of them will suffer.”The loss of naval assets does not make up for Russia’s advances on the battlefield, says Samuel Bendett, Russia analyst at CNA, a US think-tank. But the fact that a section of the Black Sea is now clear is “a huge win for Ukraine”.“Russia has one of the largest and supposedly more capable navies in the world. Yet it’s been pushed around by essentially commercial boats that are a fraction of the technological sophistication of a typical Russian naval vessel.”Sea drones, first launched in October 2022 when two Russian warships were hit in the port of Sevastopol, have been key to denying Moscow control of the Black Sea.The drones, or unmanned surface vessels (USVs), are fairly simple by modern warfare standards: small and uncrewed, they are filled with explosives and steered towards targets by controllers who watch live feeds via satellites.Often attacking from multiple directions, the drones strike in “packs” to mitigate losses and increase damage: if one drone is able to blow a hole in a target, another can be steered towards the impact point.
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Your browser doesn’t support HTML5 video.Footage from a drone attacking a Russian Navy Vessel in October 2022. Source: @ConflictsCruise missiles have also played a part. In April 2022, Ukraine’s Neptune anti-ship missiles sank the 186m long Moskva missile cruiser, Russia’s $750mn flagship in the Black Sea. Last month the Kommuna rescue ship was also damaged by Neptunes. Franco-British Storm Shadow and Scalp missiles have also been used in attacks.In total, 27 of the 80 warships Russia had in the Black Sea before the invasion have been damaged or destroyed, according to Ukraine’s navy, including large landing ships, missile boats, a submarine and a patrol vessel. About 15 vessels remain out of action and are undergoing repairs.Despite their simplicity, Ukraine’s sea drones tell a broader story about how innovation occurs within warfare, according to Fiott.“In the west, the concept we’ve got used to is that innovation is something that happens in labs and then you bring it to the military dimension. Whereas I think the Ukrainians have really got us back to a much more traditional understanding of what innovation means.”This is epitomised by the Magura V5, developed by Ukraine’s military intelligence directorate (GUR). Named after a Slavic goddess of war, the 5.5m long drone with a range of 800km emits little heat, Ukraine’s military intelligence agency told the BBC, making it difficult for thermal cameras to detect. It can carry 320kg of explosives and travels at 80km an hour.The Magura V5 sea drone is steered remotely and has a range of up to 800km © Reuters/Valentyn OgirenkoIn February, Russia’s 56m long, $70mn Ivanovets missile boat, intended for engaging combatant ships in the open sea, was destroyed after three direct hits by Magura drones. Six were involved in the sinking of the $60mn-$70mn Sergey Kotov patrol ship in March.Ukraine also has the Sea Baby drone, developed by its domestic intelligence agency, the SBU. It has been used in several attacks in the Black Sea. The latest version can be used as a kamikaze drone, capable of carrying a payload of up to 1 tonne over 1,000km.“It’s technology applied to winning wars,” says Fiott. “And if you see what the Ukrainians are doing in the naval dimension, I think that’s a really powerful example of this.”“But I think the bigger problem for the Russians is that they haven’t yet found an effective way of deterring the method of which Ukraine attacks,” he says. “So there would be no point in Moscow putting more of a fleet in the Black Sea, because the likelihood is that they’ll be struck again.”According to Bendett, Ukraine’s achievements have also been based on its flexibility. Upstarts can move a lot quicker than established navies, he says, which have to deal with a lot of bureaucracy. “Meanwhile, Ukraine is already on its sixth or seventh generation USV.”All of this has been enabled by commercial technology that can now be assembled into a military system, says Bendett, citing Ukraine’s use of Starlink satellites to steer the drones.“That’s completely unprecedented. Because 20 years ago, if we talked about war, we talked about military grade systems only. And now we have commercial systems which are not only enablers, but key components to conducting very advanced operations which, before this war, were in the purview of the military only.”Shared riskRussia’s retrenchment in the Black Sea is only one factor in the recent surge in seaborne trade. Another is the pioneering insurance deal that has given fresh confidence to the shipping sector.The deal signed in November saw global insurers agree to provide affordable cover to ships carrying grain and other critical food supplies from Ukraine’s Black Sea ports.The contract was updated in March to cover ships carrying all non-military cargo, such as iron ore, steel and containerised shipping. Marcus Baker, global head of marine, cargo and logistics at Marsh McLennan, says the deal has been of “enormous benefit” to Ukraine.“If you wanted to take your ship up to Odesa to pick up cargo, it would have cost you about 4 per cent of the value of the ship. That’s quite significant when you’re looking at cargo values at around $10mn-$15mn. And that increased cost obviously goes on the cost of the cargo.”“Now the rates are probably around net to the client of between 0.4 and 0.75 per cent, depending on the type of ship”, says Baker. “So you’ve gone from a 4 per cent rate to about a 0.4 per cent rate.”The risk is shared between insurers and Kyiv, with the state bearing the first portion of any claims up to an undisclosed level.“I don’t want to make insurance sound like it is some kind of saviour for Ukraine,” adds Baker. “But I don’t think it’s ever been done before where a country that is actually at war is taking the decision to invest in what is effectively an insurance facility.”Ukraine’s new export corridor has allayed concerns that the collapse of the grain deal would endanger global food security. Ukraine is the world’s largest supplier of sunflower oil, while its grain exports account for a significant portion of the global market. “Prior to the outbreak of the full-scale war, Ukraine accounted for over 15 per cent of global corn exports, 10 per cent of wheat, 15-20 per cent of barley and over 50 per cent of sunflower oil,” according to Ukraine’s foreign ministry.In 2021 Ukraine’s agricultural exports totalled $27.8bn, more than 40 per cent of the country’s overall export revenue. 90 per cent of these agricultural products were exported through ports on the Black Sea.But Russia still poses a threat to seaborne traffic. In November a missile damaged a cargo ship entering the port of Odesa, killing a harbour pilot and injuring three of the crew. In April Russia struck two food export terminals in Yuzhny’s Pivdennyi port, destroying agricultural products destined for Asian and African countries.It was the 39th Russian strike on the Odesa region’s port infrastructure since the war began. Russia’s targeting is an “attempt to disrupt Ukraine’s food exports to the global market”, Ukraine’s president Volodymyr Zelenskyy said. Russia also has submarines in the Black Sea, which can operate beyond the reach of drone and missile attacks.Despite this turbulent environment, Ukraine’s newly established trade corridor has allowed the country to ship over 40mn tonnes of goods in little more than six months — more than the amount transported during the entire year the Black Sea Grain Initiative was in operation.Baker believes Ukraine’s naval success has played a part. “If it was still a really hot spot, people wouldn’t be going out there,” he says. “We’ve seen how crews have reacted to trading through the Red Sea. They basically said, ‘no thanks, drop me off in Egypt’. And that’s not happened in Odesa and Chernomorsk and Yuzhny.”“I think what the Ukrainians have been able to do in terms of damage to the Russian fleet and the lessening of attacks on port infrastructure — I mean, it still happens, but there’s much less of it — has given a huge amount of confidence to the shipping community.”It has also given belief to western partners seeking evidence that Ukraine can still win the war. “Ukraine is demonstrating that . . . even when it’s got issues at home, with a lack of military systems, a lack of western support, it can still do things on its own, which are not only placing it ahead of the entire world, when it comes to the development and use of these technologies, but actually impacting Russia,” says Bendett. More