Russia’s oil exporters are warning buyers that cargoes from its key Baltic ports may not be delivered at all.
Russian producers are now saying they may declare force majeure on cargoes from key Baltic Sea ports after a sustained wave of Ukrainian drone strikes knocked out critical infrastructure this week.
The epicenter is Ust-Luga, one of Russia’s most important export terminals, where oil loadings have been halted since Wednesday following repeated strikes from Ukraine and a fire that, as of Friday, was still burning. Industry sources told Reuters that shipments may not resume until mid-April.
Nearby Primorsk—another backbone of Russia’s Baltic export system—has fared only marginally better. It sustained damage but has partially resumed loadings. Even so, partial is doing a lot of work here. Together, the two ports represent a massive share of Russia’s seaborne crude and product flows.
Reuters calculations suggest up to 40% of Russia’s oil export capacity is currently offline when factoring in port outages, pipeline disruptions, and tanker seizures.
And yet, paradoxically, Russia is making more money.
With Brent pushing past $100 and Urals crude reportedly trading near that same level amid a war-driven supply crunch, Moscow is seeing a surge in oil revenues. The spike has already prompted the Kremlin to shelve planned budget tightening and reconsider spending priorities, including military outlays.
Prices are papering over operational damage for now, but there is a limit.
Ukraine seems to be targeting Russia’s export capacity. President Volodymyr Zelenskiy has signaled that long-range strikes are designed to sustain pressure precisely as sanctions enforcement loosens and Russian barrels make their way back into global markets.
Russia can attempt to reroute flows through alternative outlets, including Black Sea ports or inland networks. But capacity is finite, and those routes are already under strain.
The potential force majeure announcement comes at a time when the oil market is already under strain. The effective closure of the Strait of Hormuz has already taken a significant chunk of oil and LNG supply off the market. Now layer in Russian export outages, and the result is a system with very little slack.
By Julianne Geiger for Oilprice.com
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