February 1998

Novorossiisk is Russia's only deep-water port on the Black Sea. Although it is an extremely expensive port to use and it has a widespread reputation for poor service and monopolistic business practices, Novorossiisk is likely to remain a major regional port for the foreseeable future. Becuase the port is known as a difficult place to do business, however, many shippers will look for alternatives whenever possible when shipping to Russia and the Caspian Basin via the Black Sea.

Importance of the Harbor
The city's economy revolves around its busy deep-water harbor, which is operated as a near-monopoly by the Novorossiisk Commercial Sea Port company. During a recent visit by U.S. Embassy personnel, at least seven ships lay at anchor outside the harbor waiting for a pier where they could unload their cargoes. New and expanded ferry service to Turkey operates regularly several times a week. Smaller local companies, like GeoPort and the Transport and Expedition Center, are building and operating roll-on/roll-off facilities for trucks carried back and forth by ship from Turkey and Bulgaria. A number of floating dry docks provide repair services for large commercial vessels from countries such as Italy, Malta, and Bulgaria.

By all reports, the port is not an easy place to do business. Pier space is at a premium, fees are high, and service is widely considered poor--for which the port has been heavily criticized. For example, a report issued last year by the World Bank, cited recently in the magazine Russia Review, alleges that the port was charging a fee $3.50 per ton of crude oil moving through the port, compared with actual costs estimated at no more than 50 cents per ton.

Another important maritime business based in Novorossiisk is Novoship, a provider of fleet services as well as an important Russian tanker operator. Despite being headquartered in Novorossiisk, Novoship reportedly does most of its business elsewhere, due the cost and difficulty of doing business there.

The new Caspian Sea Pipeline Consortium (CPC) is also headquarterd in Novorossiisk. The difficulties of doing business in the existing port are reportedly one reason the CPC is planning to build its oil terminal and floating moorings at Yzhnaya Azeryeika, 15 kilometers to the north.

The largest local concern using the Novorossiisk port is the city's cement plant. Although its facilities appear to be in poor condition, the plant's output has reportedly risen from 30 percent of capacity in 1996 to 50 percent last year.

Downtown Growth
Novorossiisk's compact downtown is undergoing slow, steady reconstruction and growth. Many attractive older buildings in the city center are being refurbished. Novorossiisk's showcase harbor park area is being cleaned up as well, although at least one major thoroughfare remains closed due to reconstruction. Most downtown merchants have moved indoors to well-stocked, if not always modern, shops. Prices for most goods in tend to be slightly lower than in Moscow. Elsewhere, however, the kiosk remains the standard retail outlet.

Two large, communist-era hotels serve this city of 300,000. Rooms are reasonably priced and hot water is available year-round. A four-star resort hotel 35 kilometers away in the coastal town of Gelendzhuk charges Western prices, but does little business outside the summer tourist season. Most foreign business travelers in Novorossiisk--largely from Turkey, Romania, Cyprus, Greece, and Armenia--seem to prefer proximity to the city's downtown area over more luxurious accomodation.

Climate
Novorossiisk's climate can be severe. An April 1997 storm, for example, sank numerous ships at the pier with 10-foot waves and 60-knot winds. Port officials estimate that 70 days out of the year the harbor is not usable due to the fierce "Bora" winds, which blow down the mountains from the north and create unsafe navigational conditions. Because of these winds, the nearest commercial airport is 40 kilometers to the west at Anapa. This article is based in part on reporting from the American Embassy in Moscow. For more information on Novorossiisk, visit BISNIS Online at www.mac.doc.gov/bisnis/cables/971104ru.htm.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)