Escalation of Black Sea conflict may harm export of ammonia, grain from Ukraine

Prices for insurance of ships operating in the Black Sea have tripled in the last month and continue to rise after recent Ukrainian attacks on ships and ports in the region, the Financial Times reported, citing insurance brokers.

"The cost of war risk insurance for ships sailing through the Black Sea — a critical trade zone for commodities such as grain and oil — jumped after attacks by Ukrainian special forces on infrastructure including Russia’s Novorossiysk port," the publication reports.

War risk insurance prices have risen from about 0.25 to 0.3 per cent of a ship’s value in early November to between 0.5 and 0.75 per cent this week, Marcus Baker, head of marine and cargo for broker Marsh, told the Financial Times, bringing price rises to as much as 250 per cent.

A commodities insurance broker at another firm said that prices for their clients had risen more than 200 per cent.

Baker said increases had been the steepest in Russian areas of the Black Sea, which is also bordered by countries including Ukraine, Georgia, and Turkey.

"Russia will escalate things into Ukraine, so we will probably see further increases in rates in the region," Baker said.

The broker said the biggest hikes were for tankers linked to Russia, followed by Russian bulk carriers transporting grain and other cargo.

A maritime security expert who spoke on condition of anonymity said the attacks had frightened tanker owners who fear even vessels engaged in "legitimate trade" could be targeted.

Last week, a Turkish tanker was damaged by four explosions off the coast of Senegal. Following the attack, the Istanbul-based owner, Besiktas Shipping, said it was suspending all "Russia-linked voyages."

Baker suggested that the attack could have been an attempt by Ukraine to disrupt tankers' activities with Russia. However, Kyiv's involvement in the Senegal incident has not been confirmed.

"Nobody would have put Senegal on the map as a heightened war risk ... it could mean that there’s a general increase in war risk [insurance] rates" beyond the Black Sea, he said. "This type of [attack] is just becoming a bit more random."

The maritime security expert said shipowners worried that the escalation might spur Russia to retaliate by hitting Ukrainian ammonia and grain exports.