Insurance companies have informed ship charterers operating in Russia’s Black Sea ports of a significant increase in “war risk premiums,” reflecting heightened tensions in the region. This premium, which was initially introduced for tankers due to Russia’s military actions in Ukraine, has now been raised from around 1% of cargo cost to approximately 1.20-1.25%. Recent military activities in the Black Sea area, including attacks at Russian Black Sea ports, have raised concerns and prompted this premium increase.
The rise in war risk premiums translates to higher costs for shipping in the region. For instance, delivering Russian oil to India on a Suezmax tanker (capable of carrying 120,000-200,000 tonnes) will now cost an additional $200,000 per voyage. This increase in premiums adds to Russia’s already elevated oil export expenses, which have been impacted by sanctions since February 2022.
While the immediate financial impact is not substantial, the added costs contribute to the overall economic strain on Russia’s oil exports. At the height of the supply and sanctions crisis, Russian companies were shouldering as much as $20 million per tanker for insurance, shipping, and freight costs, which accounted for over a third of each cargo’s value.
The application of higher war risk premiums primarily affects cargoes carrying Russian oil and products, highlighting the perceived higher risks associated with these shipments. In contrast, cargoes carrying volumes of Kazakh origin have seen relatively stable premiums of around 1%.
The increase in war risk premiums for oil tankers parallels concerns expressed by grain traders about the security of grain shipments. This escalation underscores the broader apprehensions within various markets due to the geopolitical tensions in the Black Sea region.
Overall, the surge in war risk premiums in Russia’s Black Sea ports serves as a stark reminder of the impact geopolitical uncertainty can have on shipping costs, trade, and global supply chains. As tensions persist, monitoring the evolving situation will remain crucial for all stakeholders involved in maritime operations in the region.