Record-High Transportation Costs Are Eating Away russia’s Oil Export Revenues

The cost of maritime transportation of  russian oil from Black Sea ports continues to rise.

From  August 31 through  September 6, freight rates for Aframax-class tankers from novorossiysk to Western India rose by 2.7%, to $23.2 per barrel, and to Northern China – by 3.1%, to $25.7. Shipping costs to Türkiye rose by 2.2% – to $12.8 per barrel.

Some shipments from the Azov-Black Sea basin are being rerouted to northwestern ports of the rf. This is increasing the volume of traffic on the Baltic route. Freight rate from Baltic ports to Eastern India rose by 3.7% over the week – to  $17.2 per barrel.

One of the reasons for the price increase is higher risks to shipping. Some shipowners are avoiding calls at novorossiysk, which is reducing the number of tankers available to transport russian oil. In early September, a tanker voyage carrying Urals crude from novorossiysk to India cost $18–20 million.

Insurance costs have also risen. Due to military and operational risks in the Black Sea, shipowners are raising insurance premiums and factoring them into freight rates.

The available tanker fleet is also shrinking. Some vessels have shifted to Middle Eastern routes, where carriers receive higher rates due to the risks involved in transiting the Strait of Hormuz. At the same time, the number of tankers available to load Urals crude at russia’s northwestern ports remains limited in September.

russia is forced to pay more to deliver oil to its major buyers. High freight rates eat into export revenues and give India and China additional leverage to demand lower prices, shifting logistical and insurance risks onto russian suppliers.

Expensive transportation and insurance will further reduce the rf’s tax revenues. Delays in shipments may also increase oil inventories in russian storage facilities and force companies to cut production.