Rising Black Sea tensions threaten Turkish economy

• Insurance rates rising
• Strikes on 3 tankers
• Erdoğan seeks de-escalation

Ukraine’s war against Russia is threatening to further impact the Turkish economy, as Kiev targets vessels operated by Moscow within Turkey’s Black Sea maritime economic exclusion zone. 

Brokers increased maritime insurance rates for vessels sailing in the Black Sea on December 1. This was two days after the oil tankers Virat and Kairos were struck by sea drones operated by Ukrainian special forces. 

Both vessels, currently registered in Gambia, are subject to international sanctions after being identified as part of Russia’s “shadow fleet” – ships used to carry illegal oil cargoes. 

Both ships were en route to the Russian oil port of Novorossiysk when targeted, according to maritime tracking sources, with neither laden at the time. 

In the wake of the strikes against the two tankers, war risk premiums on coverage for ships heading to Russian Black Sea ports rose from around 0.6 percent of a vessel’s value to between 0.65 and 0.8 percent. 

There was also an increase in coverage costs for ships travelling to and from Ukrainian ports, though these remain below those for ships berthing at Russian terminals. 

In both cases, higher premiums will push up Turkish freighting costs to its two neighbours. These could rise further after a third ship, a Russian-flagged liquids carrier transporting sunflower oil to Georgia, reported being damaged by an external explosion on December 2 while off the Turkish coast. 

On December 1 Turkish President Recep Tayyip Erdoğan called for a de-escalation in the Black Sea. “Targeting commercial vessels in our exclusive economic zone is a matter of increasing concern,” he said.

“We cannot, in any way, justify attacks that endanger the safety of navigation, particularly in our exclusive economic zone.”

The economic fallout from the strikes against Black Sea shipping will be immediate for Turkey, according to Aydın Sezer, founder of the Ankara-based Turkey-Russia Research Centre, in particular trade with Russia.

“The immediate major concern is that navigation in the Black Sea has clearly been negatively impacted, made insecure and will now affect trade,” he said.

“As Turkey-Russia trade has quite a large volume, this will impact the Turkish economy. This breaching of safety and security in the Black Sea is extremely important for Turkey.”

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Turkey has scaled back its imports of Russian Urals crude oil in the past month, under pressure from US-backed sanctions, from 300,000 barrels per day to 200,000. However Moscow still remains one of the country’s leading trade partners. 

Russia is second only to China as Turkey’s main source of imports and is in the top ten as an export destination.

Further strikes could see trade disrupted, especially if a Turkish-flagged vessel bringing or taking goods to Russia was to be targeted, Sezer said.