RUSSIA'S BLACK SEA PORTS by Paul J. Norton Russia s Black Sea ports, all of which are located in Krasnodar Krai, have increased dramatically in importance since the dissolution of the Soviet Union in 1991, when Russia lost numerous ports and billions of dollars of port revenue to new neighboring countries. In the Black Sea region alone, Russia inherited just four of 17 Soviet-era ports. Competitors in Georgia, Ukraine, and the Baltic countries divert significant amounts of container and bulk traffic. To compete for today s shipping, and to handle the increased traffic expected to flow through the region in the future, Russia's Black Sea ports require significant investment. Novorossiysk and Tuapse Novorossiysk is the most important Russian port in the Black Sea, already handling 30 million tons of crude oil per year--one third of Russia s annual crude exports. This volume represents an even greater proportion of Russia's seaborne crude exports, which last year amounted to 50 million tons, since almost all of the balance was shipped via Ukrainian and Latvian oil terminals. The volume of crude flowing through Novorossiysk will only increase in the years ahead, beginning with the anticipated 62 million tons to be exported annually from the Tengiz fields in Kazakhstan. Tuapse is Russia s second largest Black Sea port. Like Novorossiysk, it is a vital route for the export of crude oil. Tuapse s traditional traffic pattern also includes metals, fertilizers, coal, building materials, and foodstuffs. As trade increases, traffic at Tuapse is expected to double. To accommodate this anticipated growth, the Russian Ministry of Transport has approved a $720 million modernization project for Tuapse. Development Prospects Today, oil exports out of southern Russia are at or very near the full capacity of the region's existing infrastructure, and are growing. To meet this growth, Russia plans to increase its crude oil export capacity from the current 37 million to 53 million tons. According to the plan, oil terminals at Novorossiysk and Tuapse will be expanded to handle 32 million and 8 million tons per year, respectively. Oil is not the only force driving these modernization projects. A Russian port in the Black Sea region capable of handling a larger volume of container traffic than current facilities could save shippers millions of dollars off the cost of more expensive rail routes. Rail shipments to Central Russia and Central Asia from the Baltic countries, St. Petersburg, and even Finland are becoming less and less attractive due to additional costs, safety concerns, and transit time. A proposed rail link between Kazakhstan and China may someday shorten the route from Europe to Asia, as well, and eventually generate greater container traffic through the region. Other improvements likely at Krasnodar ports include upgrades of existing tank farms, and expansion of refined product capacity to 3 million tons at Novorossiysk and 8 million tons at Tuapse. A new petroleum products pier at Novorossiysk is virtually complete, capable of handling 1 million tons of fuel oil and 2 million tons of diesel fuel yearly. LUKoil plans to commission an oil refinery in the area, as well. Elsewhere in the krai, the first stage of a marine terminal for liquified gas is under construction near Zhelezny Rog, also on Krasnodar's Taman peninsula. The first stage is designed to handle an initial 300,000- 400,000 tons of gas exports per year. Capacity will eventually reach one million tons a year. The new facility is being built by Neftegaz, with $40 million in credits from foreign and domestic commercial banks. Financing for these projects will come from government and private sources, as well as from multilateral development banks like the European Bank for Reconstruction and Development (EBRD). The EBRD has already initiated feasibility studies in the region. It is also expected to provide Russia with a $300 million loan to finance the development of these ports. The Port of Novorossiysk is also expected to announce international tenders to develop oil, grain, and container terminals at the port. For more information about the port of Novorossiysk, contact Aleksandr Ivanovich Shilovsky, of the Port of Novorossiysk, at 011 (7) 86134 6-27-44. Paul J. Norton covers transportation for BISNIS.