Ukrainian Minister of Infrastructure Volodymyr Omelyan stated, on February 1, that “Russian’s most recent actions in the Sea of Azov have resulted in Ukraine losing $360 million” (RBC, February 1). The announcement pointedly contrasted with comments from several weeks earlier by Mikhail Sheremet, a deputy in the State Duma (the lower chamber of the Russian parliament). Specifically, the Russian lawmaker defiantly claimed that “sanctions will not change Russia’s policies in the Sea of Azov,” adding that “threats and aggressive rhetoric will do nothing but deepen the rift between the two countries [Russia and Ukraine] and hinder bilateral trade and understanding” (RIA Novosti, January 16).
In spite of its limited geographic scope, the Sea of Azov is crucial for the Russian side for three main reasons. First, it provides Russia with economic leverage against Ukraine. Second, the Azov Sea serves as an operational theater from which to deepen the political and economic rift between Ukraine’s southeastern regions and Kyiv. And third, Russian activities in the Azov Sea contribute to expanding Russia’s military power in the wider Black Sea region.
Speaking on television last summer, the former governor of Donetsk Oblast (2015–2018), Pavlo Zhebrivsky, defined Moscow’s strategy in the Sea of Azov as a “creeping annexation” (polzuchaya anneksiya), premised on blocking the remaining transit of Ukrainian vessels via the Kerch Strait as well as isolating Odesa in addition to Ukraine’s Azov Sea ports. One of the goals of this strategy, Zhebrivsky asserted, has been to pressure Kyiv into fully reestablishing occupied Crimea’s water supply, which used to come from mainland Ukraine (Rosbalt, August 15, 2018):
In turn, the secretary of the Ukrainian National Security and Defense Council, Oleksandr Turchynov, has pointed to Russia’s increasing military buildup in the region (primarily arrayed against the coastal city of Mariupol and the surrounding areas). This buildup threatens and de facto blockades all the Ukrainian cities located along the northern shore of the Azov Sea (an area known as Pryazovia) (Segodnya.ua, August 23, 2018).
Finally, the deputy chief of the General Staff of Ukraine’s Armed Forces, Lieutenant General Ihor Romanenko, noted the regional risks associated with deployments of 3M-54 Kalibr cruise missiles onto Russian naval and coast guard vessels operating in the Sea of Azov. With a reported strike range of up to 2,500 kilometers, these advanced missiles can cover all of Ukraine (Rosbalt, August 15, 2018). Collectively, these aforementioned security developments are profoundly decreasing both the economic attractiveness and logistical capabilities of Ukraine’s two main Pryazovian seaports—Mariupol and Berdyansk.
Russia’s use of the Azov Sea for shipping goods looks quite modest (at least based on official statistics). The largest Russian port there, Rostov-on-Don, handles only 12.9 million tons of cargo annually (together, Ukraine’s Mariupol and Berdyansk have an annual capacity of 17 million tons—see Part One, EDM, January 30, 2019). In contrast, the Black Sea port of Novorossiysk handles 131.4 million and Murmansk (in the Arctic High North)—33.4 million (Fontanka.ru, accessed February 3, 2019). Instead, when it comes to maritime shipping in the Sea of Azov, Russia appears to be profiting mainly from smuggling and the so-called “gray trade,” while extensively relying on illegal front companies (Krymr.com, January 30).
Connected to this, it is evident that Russia is attempting to use the Azov Sea as a means to evade Western economic sanctions. One of the most telling examples came to light on January 21, 2019, when a fire broke out aboard two Tanzanian-flagged liquid natural gas (LNG) tankers, Maestro and Candy, off the southeastern coast of Crimea. The Maestro (crewed by citizens of Turkey and India) was headed to the Russian Azov Sea port of Temryuk. However, the vessel allegedly belongs to the Turkish company Milenyum Denizcilik Gemi, which is under United States sanctions (Krymr.com, January 21). Further investigation demonstrated that, since at least 2016, the Maestro has been used to transport Russian- and Kazakhstani-originated hydrocarbon products to some countries of the Middle East, including Syria (Pravda.com.ua, January 23).
Another important area of smuggling is coal. On January 7, a ship with a Ukrainian crew (but under the flag of Panama) sank near Turkey. It was quickly revealed to have been transporting coal from Azov (Russia) to Samsun (Turkey). Importantly, the coal it was carrying aboard had first been illegally smuggled out of the Temporarily Occupied and Uncontrolled Territories of Ukraine (TOUTU)—specifically, the Luhansk and Donetsk regions (Zn.ua, January 8). Further evidence strongly suggests that the coal from the TOUTU (400,000–500,000 tons of the highest-quality anthracite extracted monthly), is being illegally transported via Russia’s Azov Sea ports and has apparently been sold to Poland, Moldova, Romania and even back to Ukraine. This supposition has been partly corroborated by detailed analysis of the Russian companies “in charge” of coal-related deals. Two key players—Vneshtorgservis (registered in South Ossetia) and Gaz Alians (Russian registration)—are closely connected to Ukrainian oligarch Serhiy Kurchenko (who fled the country in 2014) and his alleged “patron” in Moscow, Deputy Prime Minister Dmitry Kozak. Moreover, in 2018, Russia’s port city of Azov increased its transportation of coal by 50 percent year-on-year (Marker.ua, January 18, 2019). In other words, the Russian side is artificially strangling southeastern Ukraine’s trade by de facto blockading Mariupol and Berdyansk, while simultaneously increasing its own trade (especially in terms of coal) in the Azov Sea basin.
Another crucial Russian seaport used for illegally exporting coal from the TOUTU to foreign markets is Taganrog, (161.ru, August 17, 2018)—an assertion that has been implicitly corroborated by the Organization for Security and Cooperation in Europe’s Special Monitoring Mission (OSCE SMM). On January 13, the SMM detected 60 rail cars moving from Donbas toward the Russian border. Subsequently, this coal may easily have been relabeled as “extracted in the Kuznetsk Basin” and exported abroad (Marker.ua, January 18, 2019).
Over the past several years, Russia has been progressively taking de facto control over the maritime transit in the Sea of Azov and consequently slowly strangling the local economy in Ukraine’s Pryazovia. At the same time, Russia has been using these regional shipping lanes to illegally export coal extracted from occupied Donbas. In light of these dynamics, Kyiv’s policy of an economic blockade of the TOUTU (see EDM, February 24, 2017; March 29, 2017) looks increasingly ineffective and may need to be radically reformulated.