March 13, 2015

Russia and maritime flows in the Black and Baltic seas

The Ukrainian–Russian conflict has security implications for global maritime traffic in the Baltic–Black Sea region. According to an expert on flows security at the University of Tallinn and the Finnish Institute of International Affairs, Professor Mika Aaltola, “these flows are the main arteries of hierarchical global economic interdependence”.1 A direct impact of the conflict is potentially disruptive. Even if its immediate effects cannot be observed, it influences the expectations and future behaviour of regional security and economic actors—governments, people and businesses in the Black Sea and Baltic Sea littoral states first and foremost—by magnifying the political risk.

While the statistical data show that limited Russian-Ukrainian conflict has not resulted in a change in total maritime traffic in the Baltic and Black seas in 2014, Russia did reduce Ukraine’s share of growth in Black Sea shipments. Russia is likely to retain its position as a geo-economic challenger towards other littoral states, possibly strengthening its competitiveness by military means.
Black Sea shipments are important for the flow of oil, grain, fertiliser, iron ore and metals. Notably, the Bosphorus and the Dardanelles are considered as being among the world’s critical oil-flow chokepoints. Similarly, Baltic Sea energy shipments are of growing importance, and the Skagerrak and Kattegat connecting the Baltic with the North Sea are also critical oil chokepoints.
It was estimated in 2009 that the Baltic Sea area had some of the densest maritime traffic in the world, with more than 2,000 ships en route on an average day, not including ferries, smaller fishing boats or pleasure craft. Even “the imaginary line” between Helsinki and Tallinn is crossed on an annual basis by more than 7,600 tankers, 17,500 passenger ships and 25,000 other vessels.2
Maritime shipments depend heavily on the prospects for global and regional economic growth. The current economic outlook is mixed. The Baltic Dry Index (BDI) of the Baltic Exchange measures the data from key shipping routes worldwide and serves as a global indicator of general economic activity as it captures the demand for important raw materials. This index is currently at five-year lows and fell 56% in one year.3 Yet, despite the decline in oil shipments in Europe, Global Port Development Report for the second quarter of 2014 registered some increase in container throughput in European ports. The report lists Riga and Tallinn among important European ports in container trade.4 However, one of the largest Baltic Sea ports, Gothenburg in Sweden, saw a decrease in total throughput of 3%, to 37.1 million tonnes, in 2014, with a similar decline in container throughput.5
Similar maritime trade results were recorded in the Black Sea in 2014. Apart from a relative decline in seaborne energy and a rise in container traffic, Black Sea agricultural shipments were on the rise. These trade flows are important not only regionally but also globally, as both Russia and Ukraine have the ability to influence world food prices.
Remarkably, despite the conflict with Russia and the war in eastern Ukraine, the latter country’s seaborne grain exports stood at 31.5 million tonnes—an all-time high—in 2013–14, while Ukrainian ports reached a record monthly throughput of five million tonnes of grain in December 2013, according to Ukragroconsult.6 Largely due to agricultural shipments, Ukrainian ports increased total throughput by 4% to 142.8 million tonnes in 2014, excluding the small ports of Kerch and Feodosiya in Crimea. (Shipments from ports in Crimea, which accounted for around 5% of Ukrainian Black Sea shipments, were most likely redirected to other ports.) Meanwhile, cargo throughput in Russian ports on the Sea of Azov and the Black Sea increased by more than 11% to 194.5 million tonnes in 2014.7 A small growth was also seen in the Romanian ports of Constanta, Midia and Mangalia, which handled 55.6 million tonnes of cargo in 2014, an increase of 0.9% compared to 2013.8 Some shipping analysts are quite upbeat over the performance outlook of one of the largest Turkish ports handling traffic across the Turkish straits: Ambarli, one of Istanbul’s three ports. Its tonnage throughput is forecast to grow 8.5% to 4.737 million tonnes in 2015.9
But as the war in eastern Ukraine deepened, there were fears that grain shipments in the Black Sea would be curtailed. As an example, a commentary by Reuters in July 2014 warned that “ongoing tensions between Russia and Ukraine could steer major importers toward other large sellers in the region on any signs of potential disruption in grain flows from the Black Sea”. Reuters pointed to the global importance of the Black Sea region: its share of the world’s seaborne grain trade was “nearly 40 percent by 2011–12—second only to North America.”10
However, we should not underestimate the risks of disruption to maritime trade flows in the event that the Russian–Ukrainian conflict becomes protracted and if Russia continues to show its military muscle as now. This disruption has not affected total maritime trade flows, because of the limited nature of the war in eastern Ukraine, the absence of armed conflict in the Black Sea and the weak effects on seaborne trade of sanctions. The impact on Ukraine may be explained by its relative lack of economic power compared to that of Russia.
An important maritime flow that was strongly affected by the conflict is maritime tourism. Even though Ukraine had only one port technically capable of handling international cruise ships (Odessa), the number of international cruise visits to Ukraine was on the rise in 2013, following the nation’s successful hosting of the UEFA Euro 2012 football championship. While Odessa port operators expected a record 159 cruise ships to visit in 2014, it eventually recorded only 28. Some of these cruises were redirected to Varna in Bulgaria; others were lost as several international companies cancelled their plans involving Ukraine.11
But Russian cruises were also were affected, when Ukraine banned international ships from entering ports in Crimea following its annexation by Russia. An example was the Turkish-based ship Adriana, operated by Russian Baltic and Black Sea Cruises Company, which unlawfully called at Yalta and Sevastopol. Following exposure by Ukrainian media, Turkish authorities began an investigation of Adriana in July 2014.12 Remarkably, the operator’s parent company, the major Russian operator Expo Tour, became insolvent in summer 2014—also reducing Baltic Sea cruise options.13
Part of the rationale for Russia behaving like a geopolitical challenger in the Baltic, and especially in the Black Sea, is its desire to compensate for what it considers the loss of port assets with the breakup of the Soviet Union. The reduction of the share of the Baltic and Ukrainian ports utilization to 5% is a requirement of the Russia’s ports development strategy up to 2030. A 2013 article in the influential Russian weekly Expert argued that “… Russia’s total port capacity grew from 360 to 790 million tonnes, with cargo throughput increasing from 113 to 570 million tonnes in 2012”. Russian observers also acknowledged that in the Sea of Azov and the Black Sea, Russia lacked port handling capacity in all key bulk cargoes, especially coal and fertiliser.14
Remarkably, Russian analysts connect Crimea’s military significance for Russia with the large share of maritime flows through the Black Sea ports. Having annexed Crimea, Russia has been beefing up its military base, taking measures including the deployment of nuclear-capable Tu-22M aircraft, modern Kilo-class submarines and Admiral Grigorovich-class frigates.
NATO responded to the new security situation in the Black Sea with an increased rotational presence by the US Navy. As one analytical service observed, “In 2014, American warships spent a total of 207 days on the Black Sea … In 2013, US warships made just two visits to the Black Sea, spending a total of 27 days.”15 A positive development for the provision and coordination of regional security is the US ships training with not only the Romanian and Bulgarian navies, but also Ukraine’s.
When monitoring Russian militarisation closely, one can see that the delivery of new naval vessels is going on almost permanently. Furthermore, in one of his latest blogs, defence expert Dmitriy Gorenburg highlighted the opinion of Russian defence analyst Prokhor Tebin, who considers that all the additional ships and boats planned for the Black Sea Fleet are “an absolute minimum for the BSF and argues that it will still not be enough to fulfill all of the fleet’s missions or to restore the balance of power in the Black Sea”.16
Under these circumstances, the Russian Air Force appears to be the primary strategic power multiplier for some time to come, alongside the possibility of redeployment of Russian ships from other fleets. This also means an increase in air and sea military traffic in the Black Sea. It cannot be excluded that some of the incidents involving Russian aircraft, ships and boats common in the Baltic Sea area might spill over to the Black Sea. Russia’s militarisation of Crimea inevitably means the reduction of vital international Black Sea shipments and, paradoxically, will have a negative impact on Russia owing to the interdependence of the littoral states.
We should also expect Russia to try to enhance its control over the Bosphorus and Dardanelles as part of building an economy-based alliance with Turkey. However, Turkey has its own strategic interests in the Black Sea region, which serves as its gateway to both the EU and Central Asia, and it is not likely to adopt a purely Atlanticist policy.
Similarly, the shipping industry in the Baltic Sea could favour Russia’s rise to dominance and the use of military threats and probably even force. The Baltic Transport Outlook of 2010 forecast that the importance of maritime traffic would increase in the future in the region, and predicted that the largest increases would be in Poland (49.9%) and Russia (42%).17 It also forecast that Russia would account for the largest share (25%) of the total distribution of port cargo throughput among the Baltic Sea countries, followed by Sweden with 20%.
This also means that the largest share of regional maritime trade belongs to Baltic EU member states and Norway, which is a member of both the European Economic Area and NATO. Russia’s policy of challenging the cohesion of European alliances is likely to be its preferred future behaviour. Russia’s rejection of European multilateral maritime surveillance and safety mechanisms is another important source of maritime incidents.
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1 Aaltola, Mika. The Challenge of Global Flows and Commons for US Power: The Perils of Missing the Human Domain. Ashgate, 2014.p. 108
2 Pauli Jarvenpaa and Tomas Ries. “The Rise of the Arctic on the Global Stage”. In James Kraska, ed. Arctic Security in an Age of Climate Change. Cambridge University Press, 2011. pp. 140–1.
3 www.bloomberg.com/quote/BDIY:IND/chart.
4 en.sisi-smu.org/index.php?c=article&id=12752 5 en.portnews.ru/news/193868/
6 universal-trade.in.ua/novini-kompaniyi/reiting-por…
7 www.mintrans.ru/news/detail.php?ELEMENT_ID=24813 8 www.portofconstantza.com/apmc/portal/vizstire.do?b…
9 store.businessmonitor.com/turkey-shipping-report.h…
10 www.reuters.com/article/2014/07/28/us-maguire-grai…
11 cfts.org.ua/articles/laynery_v_tumane_kruiznyy_sez…
12 economics.lb.ua/business/2014/07/16/273096_turtsii…
13 cruiseinform.ru/news/morskie_kruizy/seaseason2015/
14 expert.ru/expert/2013/10/ne-tihaya-gavan/
15 www.eurasianet.org/node/71991
16 russiamil.wordpress.com/2014/03/06/the-role-of-the… 17 www.baltictransportoutlook.eu/files/BTO_FinalConfe…