Reciprocal Economic Warfare in the Black Sea
Strategic Question
Is the Ukraine-Russia Conflict Expanding to Reciprocal Economic Warfare in the Black Sea?
Key Judgement
Black Sea economic warfare continues, with Russia indicating an expansion of operations against Ukraine's economic sectors after a failed truce proposal.
Ukraine’s strikes targeting Russian Black Sea terminals have reduced Russia’s oil exports.
Russia’s attacks against Ukraine’s ports and agriculture-linked vessels escalated significantly in July, affecting August exports.
Ukraine’s truce proposal and reliance on alternative export routes may suggest greater vulnerability to Russian disruption.
Increased risk will constrain global grain supplies and increase pressure on commodity prices.
Core Assessment
The Ukraine-Russia conflict is expanding further into economic warfare as attacks focus on economic infrastructure. Russia has escalated attacks on civilian-flagged vessels associated with Ukraine’s grain industry, using drones and missiles to disrupt grain exports. The attacks have forced Ukraine to utilise alternative routes, with grain volumes possibly reduced by 50% from those normally transported through the Black Sea.
Ukraine has targeted Russian crude oil exports with drone attacks at the Sheskharis terminal in the Black Sea port of Novorossiysk, southern Russia, forcing the suspension of exports. The attacks on logistical infrastructure led to President Zelensky tabling a truce, seeking a halt to attacks on agricultural-linked vessels; however, it was rejected by President Putin, as Russia wanted guarantees that strikes against energy infrastructure would also cease. The failure of the proposed truce resulted in further escalation, with President Putin stating that Russia would strike Ukraine's sensitive economic sectors.
Background
The Black Sea is a vital global export corridor for grain, crude oil, and fertiliser. Early in the conflict, naval and military targets were struck; however, as the conflict intensified, attacks expanded beyond military targets to include energy infrastructure and the blockade of grain exports. The export disruption led to United Nations intervention and the Black Sea Grain Initiative to facilitate Ukrainian exports in 2022 and a separate Memorandum of Understanding with the Russian Federation to facilitate Russian exports.
Strategic Assessment
The Novorossiysk Terminal is one of Russia’s largest transport hubs, operating primarily as an energy and grain export terminal. The oil export facility handles approximately 700,000 barrels per day (bpd), with reports from July indicating loading of nearly 1 million bpd. Ukraine’s strikes against Novorossiysk have reportedly reduced exports to approximately 400,000 bpd, while exports from Russia’s western ports fell 15% below the planned loading volumes. The export data highlight the impact of Ukraine’s Black Sea disruption strategy and help explain why Russia’s truce position included a halt to attacks on energy infrastructure.
Ukraine relies on the Black Sea maritime corridor for agricultural exports, normally loading 5 million tonnes a month. The recent increase in Russian disruption has reduced August exports to an estimated 1.5 million tonnes. The escalation against Ukraine’s infrastructure saw 35 attacks on vessels in port, 22 at sea, and 67 strikes on port facilities in July alone, compared with 14 attacks on vessels for the whole of the previous year. Agriculture Minister Taras Vysotskyi has described the decline in export numbers as the most difficult since the invasion, highlighting the level of Russian disruption. While alternative export routes exist, they are less stable and are restricted by factors such as low water levels in the Danube, remaining capable of transporting only around 50% of the volume normally transported through Black Sea ports. The Black Sea disruption and constraints on alternative routes will affect global food prices and supply alongside the economic impact on Ukraine.
The disruption of the Black Sea export corridor has wider implications beyond Ukraine and Russia. With approximately 27% of global wheat exports coming from Ukraine and Russia, the disruption has broad repercussions, especially for food security. Asian and African states remain exposed to grain disruption, with Egypt sourcing more than 80% of its wheat imports from Russia and Ukraine, and Indonesia ordering 600,000 tonnes between July and September. While sourcing from other suppliers is an option, it comes at a substantially higher price.
Increased risk also compounds pricing as shipping operators adjust costs to reflect higher insurance premiums, with reports of daily oil tanker costs rising from USD 200,000 to USD 300,000 in a week and war insurance doubling to 2% of the value of the ship. Reciprocal Russian-Ukrainian economic warfare targeting export systems affects global markets, imposing costs beyond the targeted country. The strategy heightens commodity vulnerability and increases the significance of the Black Sea disruption as constrained commodity flows affect international supply security.
What to Watch
Russian escalation targeting Ukrainian economic sectors and Ukraine's diplomatic and military response.
Grain and crude oil export volumes and market pricing.
Shipping and insurance cost adjustments.
International agricultural importers sourcing from alternative markets.
Strategic Indicator
Black Sea Disruption ▲ Increasing
Black Sea Grain & Oil Export Volumes ▼ Decreasing
Russian attacks against Ukrainian targets escalated in July, with statements from President Putin indicating an intention to expand targeting. While Russian oil exports have declined, the failure of the proposed truce suggests that Russia is willing to sustain attacks unless Ukrainian attacks on Russian energy infrastructure cease.
Ukraine's agriculture sector remains exposed to Russian attacks, with data indicating a substantial decline in exports. Although alternative export routes may provide additional avenues for agricultural products, they are unlikely to replace volumes normally exported through the Black Sea. Ukraine’s truce proposal may indicate it faces greater economic pressure from Russian economic disruption. With increased risk and reduced supply, shipping and commodity costs will likely increase.
Sources
United Nations and European Union
United Nations — The Black Sea Grain Initiative: What Was Achieved? Why Was It Important?
United Nations source
Council of the European Union — Ukrainian Grain Exports Explained
Council of the EU source
Energy, Ports and Infrastructure
Delo Group — Novorossiysk Grain Terminal
Delo Group source
Ballast Markets — Port of Novorossiysk
Ballast Markets source
News Reporting
Reuters — Ukraine Turns to Alternative Grain Export Routes as Russia Blocks Ports
Reuters article
Reuters — Surge in Black Sea Attacks Adds Strain to Global Commodity Flows
Reuters article
Reuters — Russia's Black Sea Sheskharis Terminal Halts Loadings After Drone Attack
Reuters article
Reuters — Oil Exports from Russia's Western Ports Drop 15% Below Plan
Reuters article
Reuters — Global Wheat Buyers Brace for Supply Squeeze Amid Black Sea Attacks
Reuters article
Reuters — Putin Says Ukraine Opened 'Pandora's Box' with Strikes on Economic Targets
Reuters article
Euractiv — Black Sea Drought and Hormuz Crises Squeeze Global Food Security
Euractiv article
The Business Times — Zelensky Says Putin Rejected Black Sea Shipping Truce Offer
The Business Times article