Russian sanctions halt shipping even as pandemic pressure eases

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Russian sanctions halt shipping even as pandemic pressure eases

Docking of Russian ships in Britain is banned. Cargo containers are piling up at European ports. Airfreight resumed around Ukraine and Russia.

Just as the global economy was on its way to recovery from the coronavirus pandemic, Russia’s invasion of Ukraine and global sanctions against Moscow are rippling through logistics and supply chains, creating bottlenecks in the transport of goods and goods across countries. And threatening new economic pain for businesses. near the conflict zone.

Transport companies, marine insurance executives and industry analysts say the two-week-old war, coupled with sanctions-induced uncertainty, is causing the backup of ships at some ports and could lead to further delays in shipments, especially around Europe. .

The cost of transporting goods delivered by sea, land and air, which had already jumped during the pandemic, is also under pressure as global oil prices soared above $130 a barrel this week.

“We thought we experienced a surge from COVID in January and February,” said Detlef Trafzer, chief executive officer of Swiss-based Kuene + Nagel, one of the world’s largest transport companies that operates ships, Delivers cargo by air, rail and truck. “But the Ukraine-Russia crisis is a huge blow,” he said, “and it will be a long-lasting blow.”

The most visceral shock is being felt near the center of the war zone in the Black Sea.

More than 100 ships and their crew have been stranded in Ukrainian ports since Russia invaded Ukraine. Missiles have struck several commercial ships, and an explosion on or near an Estonian dry cargo ship sank 20 miles from Odessa, a Ukrainian port. All members of the Russian and Ukrainian crew survived.

Marcus Baker, global head of marine and cargo at Marsh McLennan, an insurance broker and risk consultant, said the risk has forced shipowners to pay an additional insurance premium of 1 to 5 percent of the ship’s value. The insurance industry’s Joint War Committee this week widened its high-risk areas closer to Romania and Georgia after adding Russian and Ukrainian waters last month.

The Secretary-General of the International Maritime Organisation, Kitak Lim, told an emergency council session on Thursday that there were serious concerns about the safety and welfare of seafarers in the Black Sea and the Azov Sea, and that collateral damage could not have been caused to the sailors. military crisis.

The blockade has squeezed global grain supplies from one of the world’s largest grain-producing regions, raising wheat prices in world markets and raising the risk of inflation. Russia and Ukraine together make up about a quarter of global wheat exports.

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Analysts say the problems around the Black Sea are just the tip of the iceberg, disruption to the entire logistics industry and pressure on global trade.

Over the past two weeks, some European terminal operators have refused ships carrying cargo to Russia, and hundreds of Russian-bound cargo containers have piled up on others.

Britain has gone ahead with announcing sanctions that would ban Russian ships from its ports in a bid to “restrict Russia’s economic interests”. Richard Ballantyne, chief executive of the British Ports Association, said around 20 ships had been removed from British ports.

Global ports were already facing roadblocks during the COVID-19 pandemic – particularly in the United States, where backlog warehouses across the country and a lack of truckers have left many ships stranded from California.

While the impasse in Europe’s ports is not as severe, sanctions intended to punish Moscow without ravaging the European economy are shifting that count.

At the port of Rotterdam in the Netherlands, Europe’s largest port, some terminals have been turned into “a parking lot” for hundreds of cargo containers destined for Russia, said Ty Schleckens, a spokesman for the port.

Many containers stacked at docks undergo time-consuming customs inspections to ensure they are not carrying blacklisted items, such as spare airplane parts or semiconductors. The pileup is not disastrous, Mr Schleckens said, but to prevent further congestion, some port operators are refusing to accept any cargo-carrying ships headed to Russia.

At the same time, he said, some European companies are not even trying to ship goods to Russia for fear of breaking the sanctions list by Western allies, which is increasing by the day. Businesses have also begun curbing production amid concerns that Russian customers will not pay for products shipped to them, as financial sanctions are affecting payment mechanisms.

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“This means that the impact of the sanctions is broader than the sanctions themselves,” Mr Schleckens said.

Mark O’Neill, President Colombia Shipmanagement, a maritime services provider based in Cyprus, said the impact on the smooth flow of cargo was significant.

“As soon as you put restrictions and restrictions, and companies themselves block some business, the knock-on effects of additional checks inevitably lead to delays,” he said. “The maritime logistics element is a very well-oiled machine, and it only takes a tiny bit of petal to throw into the pond for the waves to feel very far away.”

The bottlenecks are not just on the water. Sanctions against Russia are putting renewed pressure on already tight air cargo capacity, driving up transportation rates. With Russian airspace limits for most carriers, and the United States, the European Union and Canada banning Russian aircraft from their airspace, the global air cargo market is being sharply squeezed, analysts said. he said.

Flights especially between Europe and Asia have to be redone, adding three to four hours to some routes and requiring more fuel as the war pushes oil prices to record highs.

Russian carriers such as AirBridgeCargo and Aeroflot Cargo – the two big players, which fly about one-fifth of global air cargo volume – have sharply backtracked. While just 3 percent of global cargo travels in planes, air cargo makes up more than a third of the value of world trade.

Ground transport is also being affected, as the conflict disrupts major rail routes between the EU and China, slowing trade. Some companies have suspended rail freight movement between regions over concerns about disruption at the borders. The sanctions also meant that European companies could no longer work with Russian Railways.

Trucking is also not being spared. Kuehne+Nagel halted deliveries from Europe and China to Russia to avoid violating sanctions, Mr Trafjar said. But Europe’s trucking industry is also facing a new shortage of drivers, as thousands of Ukrainian truck drivers have returned to Ukraine to join the fight against Russia.

It makes many European companies more dependent than ever to deliver their goods to customers. But executives and analysts say the situation in the industry is likely to get worse before it improves.

“Transportation links are essential to global supply chains, and they are already affected by the global pandemic,” said Anna Nagurney, a professor at the Isenberg School of Management at the University of Massachusetts.

“Now we have an additional man-made disaster,” she said.

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