Admiral Stavridis on a Plan to Get Ukrainian Wheat Out of a Warzone

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, one of the ongoing, there are numerous forces that are sort of conspiring, so to speak, to create shortages in various commodities, but a persistent one clearly is the ongoing war, the invasion of Ukraine by Russia.

Tracy Alloway (0:33)

Right, so this is something we've spoken about, I guess, multiple times at this point, but Ukraine, of course, sometimes referred to as the breadbasket of Europe or whatever cliche you want to use, a big portion of the world's grains derive from Ukraine. I mean, there's also lots of grain growing in Russia as well, which is also off limits now, but there's an issue, obviously.

Russia is blockading the country, it's hard to get that grain out, which means that there's a shortage, which means that prices are rising, which means that we've seen pressure, I mean, particularly in emerging markets, places like Egypt that actually get a lot of their food supply from Ukraine.

Joe Weisenthal (1:09)

Yeah, that's right. So we can look here at a chart of, say, wheat futures, and the price is obviously going up, but for the American consumer, they're sort of like underlying food commodity prices, they're only a modest contributor to food inflation overall. In many emerging markets, they're much more exposed directly to the price, and what's worse is not just the price but outright shortages. So it's one thing to say, okay, the price is up, it's another thing to say, you literally cannot get the grain, you literally cannot get the wheat, but that is the risk that's being faced right now for multiple reasons, but in large part due to this war.

Tracy Alloway (1:45)

Right, and you can imagine that would manifest itself in political pressure in a lot of places in the world. When people can't eat, they tend to get angry, right? I mean, rightfully so.

Joe Weisenthal (1:57)

Yeah, and so then the question is, I guess there's two questions, one is what is happening with wheat plantings in Ukraine, but then even if plantings were to somehow be sustained amid the war, how much of the grain can actually get out? And as you mentioned, right now, there's very little getting out.

Tracy Alloway (2:16)

Yeah, and this sort of goes back to, I guess, the military tension between Russia and Ukraine, but how do you actually get supplies into the country and how do you get vital goods out? Because you still want the supply of wheat and food to be flowing relatively freely. And you also want Ukraine to be able to make some money, right, at a time when it actually needs money and could use that to buy weapons and supplies.

Joe Weisenthal (2:41)

That too. All right. So for more, we're going to be talking about some of the options to actually do this and whether there's a way for the US military, Western forces to play a positive role in safely getting grain out of the country. We're going to be speaking to Admiral James Stavridis, who is, among other things, the 16th Supreme Allied Commander of NATO. He has personal experience in perhaps similar operations or similar situations of moving commodities around the world. He has a really deep understanding of this stuff. So, Admiral, thank you so much for coming on Odd Lots.

James Stavridis (3:15)

I really appreciate it. It's great to be with both of you. Thank you.

Joe Weisenthal (3:18)

Absolutely. Thank you so much. So to start, you give us your assessment of the current situation, why exporting grain from Ukraine right now is so constrained.

James Stavridis (3:31)

Well, I'm really struck by a book I just published called To Risk It All, Nine Conflicts and the Crucible of Decision. And it's about decision making under extreme stress. And so here I think we have a pretty good example of both Vladimir Putin on, if you will, the dark side of the equation and Volodymyr Zelensky on the lighter side, on our side of the equation. Both of these men are literally risking it all. And one of the crucial components of it is this ability or not to export grain. I think you and Tracy, Joe did a nice job laying out the challenges globally if it doesn't get out. So we come pretty quickly to, okay, Admiral, so how would you get the grain out? You know, I don't need to tell an Odd Lots audience that 95% of all international trade moves by sea.

And grain, of course, is a commodity that moves out in mass. And so the idea of trying to truck it out or even train it out of Ukraine just doesn't serve. So the problem is Russia has taken their Black Sea fleet, about 40 warships, and effectively they've blockaded the entire coastline of Ukraine. They already control on the land side about 70% of that coastline on the Black Sea, but that remaining 30% has Odessa in it. And Odessa is like Los Angeles, Long Beach, in the context of the United States. It's the port. And therefore the key is how can we, if you will, open that port? And at the moment, it's not only blockaded by Russian warships, but it's mined in both by the Ukrainians and reportedly by the Russians. So it's a very complex maritime problem.