Overview
Over the last several months, the conflict between Russia and Ukraine in the Black Sea has escalated rapidly, endangering shipping routes and heightening tensions between Russia and NATO. Most recently, drone strikes have occurred in Romanian territorial waters and near Bulgaria’s. The worsening crisis in the Black Sea is undermining both Ukraine and Russia’s ability to export from Black Sea ports, which has particularly important implications for global agricultural markets. Strikes targeting the waters of NATO members are also intensifying Russia’s overall campaign against Ukraine’s European supporters and could potentially create new sources of tension between the US and Europe.
The Black Sea’s security crisis creates both downside and upside risks for international businesses. The strangling of Black Sea shipping could risk undermining global food security and worsening shortages on global energy markets, undercutting economic prospects and potentially feeding political instability in countries reliant on imports. However, growing NATO focus on the Black Sea could increase demand for defense technologies supporting air defenses, surveillance and domain awareness. Interest in diversification and supply security could create opportunities for alternative supply routes and alternative sources of commodities.
Escalation and a Worsening Maritime Security Environment
Over the last several months, the maritime security environment in the Black Sea has deteriorated significantly amid Russian and Ukrainian strikes against cargo vessels transiting the strategically vital corridor. Between July and September, almost 390 ships were struck, a fivefold increase compared to the previous quarter. Risks to crewmembers have also markedly increased as the death toll for sailors in the Black Sea outstrips that of any other body of water for this year, including the Strait of Hormuz.
Moscow and Kyiv aim to economically pressure each other as significant progress on the battlefront remains elusive. Russia, which is currently responsible for most of the strikes, has hammered Ukrainian Black Sea ports since the summer, attempting to undermine Kyiv’s ability to bring its agricultural products to world markets; agricultural products account for over 55% of Ukrainian goods exports. Ukraine has sought to pressure Russia by attacking its Black Sea ports as well.
Moreover, October has seen significant escalation in Black Sea tensions between NATO and Russia over attacks on shipping. Throughout October, there have been multiple drone strikes on commercial vessels in the Black Sea near Bulgarian and Romanian shores, including within Romania’s territorial waters, that have worsened the maritime security situation in the region. Beginning on October 5, a vessel was struck within Romania’s exclusive economic zone (EEZ). On October 6, two vessels were attacked inside Bulgaria’s EEZ. On October 14, a tanker was struck within Romania’s territorial waters. Another ship was struck on October 23 just outside Romania’s territorial waters. The extension of strikes on shipping in the Black Sea into the EEZs and territorial waters of NATO members represents a significant escalation. While Russia has not claimed responsibility, Bucharest has implicated Moscow and Sofia has stated that the attacks benefit Russia.
The worsening security environment has led to reduced capacity for Ukraine and Russia to use Black Sea ports and to skyrocketing insurance rates. Ukraine has redirected most cargo shipments to rail routes or through its three Danube River ports rather than its Black Sea ports, which have historically accounted for 90% of agricultural exports. This has led to falling export numbers since the alternative routes cannot accommodate the same volume of trade, with Ukraine’s grain exports dropping 75% in early August year-over-year. Russia has seen its grain export capacity fall by an estimated 70%. Regarding insurance, in September the Joint War Committee – a body composed of members from London’s insurance company market and from the Lloyd's Market Association, which determines insurance “war risk” zones – categorized almost the entirety of the Black Sea as a war risk area, excluding the territorial waters of NATO members. The shift in strikes towards Bulgarian and Romanian shores now heightens risks for shipping in the entire Black Sea.
Between NATO and Moscow: The Security Politics of the Black Sea
The shift towards strikes on ships in or near Romanian and Bulgarian territorial waters corresponds to Russia’s escalating campaign against Kyiv’s European backers, raising the pressure on NATO. This campaign has included attempted attacks on critical infrastructure, such as the Leipzig airport, as well as sabotage efforts against defense industrial production facilities across Europe. By attacking vessels close to the Danube and near Romanian and Bulgarian shores, Russia is seemingly attempting to ratchet up its pressure on Ukraine’s economy by strangling its alternative export routes while increasing the risks and costs for Ukraine’s supporters.
Both Romania and Bulgaria have already requested assistance from NATO. In turn, NATO discussed the strikes during the North Atlantic Council meeting on October 20, and NATO has begun moving maritime patrol aircraft, drones and radar systems to the Black Sea to bolster its capabilities and to support Bucharest and Sofia. Romania has also announced plans to accelerate its deployment of new surveillance capabilities. While the alliance will also have to carefully calibrate its overall response, momentum is gathering for NATO to build up its institutional presence on Black Sea security; both Bucharest and Sofia are advocating for the establishment of a regional command alongside Türkiye.
Although NATO is responding to the wave of strikes in the Black Sea, escalating tensions coincide with a delicate moment in the US-Europe relationship. Washington is signaling downsized engagement with NATO and directly negotiating with Russia to end its war on Ukraine. The US is conducting a six-month force posture review to assess its European footprint, which began in late July. This year, the US has also cut asset commitments to NATO, including bombers, fighter jets, warships, and submarines. Regarding Russia, the administration has offered Moscow sanctions relief on diesel, and US President Donald Trump has downplayed the severity of Russia’s aerial campaign against Ukrainian infrastructure and civilian targets. Ukraine also faced disruptions to American support, such as restrictions on Starshield connectivity services, although the exact reasons for the disruptions are contested. Increasing tensions in the Black Sea therefore potentially add another source of strain to the already fraught defense and security relationship between the US and Europe. On the other hand, if the US and Europe find themselves aligned on new security measures in the Black Sea, it could provide a point of cooperation in the transatlantic security relationship.
Outlook, Risks, and Opportunities
The Black Sea’s deteriorating security environment creates downside risks for global commodities markets. The Black Sea is a significant route for energy flows and a critical global artery for agricultural products. Ukraine and Russia accounted for almost 30% of global wheat exports, and Ukraine provided around 10% of global corn exports and 4% of barley exports. Both Russia and Ukraine have looked for alternative routes, such as Russia redirecting its exports from the Black Sea to the Baltic, but those routes are both more expensive and unable to fully compensate for the Black Sea. Both Kazakh and Russian oil also ship through the Black Sea. The importance of Black Sea energy flows is magnified due to disruptions from the Iran war, so markets may struggle to adapt to two theaters under pressure. Heightened instability could also undermine longer-term energy development in the Black Sea, such as Romania’s Neptun Deep offshore gas project.
Strikes on ships and port infrastructure in the Black Sea also risk horizontal escalation of the Ukraine war. Commodity shortages could worsen risks for political instability in major importers of Russian and Ukrainian agricultural products and worsen economic outlooks. Russia’s port of Novorossiysk also serves as Kazakhstan’s primary export route, and Ukrainian drone strikes on the port over the summer forced Kazakhstan to throttle oil production due to a lack of alternative routes. Likewise, the deaths of sailors from other countries such as Azerbaijan and Egypt have the potential to draw those countries deeper into the conflict diplomatically.
Escalation in the Black Sea could also sharpen tensions between Washington and European capitals if the two sides perceive each other as pursuing strategies at each other’s expense. Any European doubts about American commitment would stack on top of preexisting concerns about reliance on American-provided defense products and on infrastructure that plays a critical role in security. This will depend on how American and European approaches to the Black Sea’s evolving dynamics play out.
There are also significant potential upside risks. A more dangerous security environment will likely drive demand for air defense capabilities, especially counter-drone systems, as well as for greater surveillance and domain awareness capabilities. A greater NATO focus on the Black Sea could institutionalize demand and create new opportunities for defense companies. During the last NATO summit, Romania, Bulgaria and Türkiye agreed to expand a preexisting trilateral mission on clearing mines to also protect critical infrastructure. Since 2022, NATO has also created initiatives like Task Force X to leverage unmanned systems for more persistent maritime domain awareness.
There will also be potential opportunities for companies involved in trade route diversification and alternative supplies of commodities. Kazakhstan is investigating development of alternative routes for its oil exports to reduce its reliance on the Caspian Pipeline Consortium, which runs through Novorossiysk. Similarly, there has been a global shift towards prioritizing security of supply for critical resources like energy. Companies working on new trade or export sources for commodities affected by the Black Sea’s security could also see new opportunities as the security environment worsens.
