Russian ships were banned from mooring in the UK. Cargo containers are piling up in European ports. Air transportation is redirected across Ukraine and Russia.
While the global economy was supposed to emerge from the coronavirus pandemic, Russia’s invasion of Ukraine and global sanctions against Moscow are spreading through logistics and supply chains, creating bottlenecks in the transportation of goods and goods and threatening new economic pain for countries and businesses. next to the conflict zone.
Shipping companies, marine insurance executives and industry analysts say the two-week war, combined with the uncertainty caused by sanctions, is forcing ship reservations in some ports and could lead to longer delays in deliveries, especially in Europe.
The cost of transporting goods by sea, land and air, which has already jumped during the pandemic, is also under pressure as global oil prices topped $130 a barrel this week.
“We thought we experienced a Covid pullback in January and February,” said Detlef Treftzger, chief executive of Swiss-based Kuehne+Nagel, one of the world’s largest transport companies that delivers cargo by sea, air, rail and truck. “But the crisis between Ukraine and Russia is a huge setback,” he said, “and it will be a lasting setback.”
The strongest blow is felt in the very center of the war zone, in the Black Sea.
More than 100 ships and their crews have been stuck in Ukrainian ports since Russia invaded Ukraine. Missiles hit several commercial vessels, and an explosion on or near an Estonian bulk carrier sank 20 miles from the Ukrainian port of Odessa. All Russian and Ukrainian crew members survived.
The risk forces shipowners to pay an additional insurance premium of 1 to 5 percent of the vessel’s value, said Marcus Baker, head of shipping and freight for Marsh McLennan, an insurance broker and risk consultant. This week, the Insurance Industry Joint Military Committee expanded the high-risk area to waters near Romania and Georgia, after adding Russian and Ukrainian waters last month.
International Maritime Organization Secretary-General Kitak Lim said Thursday at an emergency council meeting that there are serious concerns about the safety and well-being of sailors in the Black and Azov Seas, and that sailors cannot be collateral damage in a military crisis.
The blockade has cut global grain supplies from one of the world’s largest grain-producing regions, pushing up the price of wheat on world markets and exacerbating the threat of inflation. Russia and Ukraine together account for almost a quarter of world wheat exports.
The problems around the Black Sea are the tip of the iceberg, causing disruptions throughout the logistics industry and putting pressure on global trade, analysts say.
Over the past two weeks, some European terminal operators have abandoned ships carrying cargo to Russia, while others have piled up hundreds of cargo containers bound for Russia.
The UK went even further by announcing sanctions barring Russian ships from entering its ports in a bid to “restrict Russia’s economic interests.” About 20 ships were sent from British ports, said Richard Ballantyne, chief executive of the British Ports Association.
Global ports have already experienced bottlenecks during the Covid-19 pandemic, especially in the United States, where dozens of ships are stranded off the coast of California due to a lack of warehouses and a shortage of truckers to move cargo across the country.
Although congestion in European ports is not as severe, sanctions designed to punish Moscow without destroying the European economy change that calculation.
At the Port of Rotterdam in the Netherlands, Europe’s largest seaport, some terminals have become a “parking lot” for hundreds of shipping containers bound for Russia, port spokesman Thie Schellekens said.
Many of the containers stacked at the docks are waiting to go through laborious customs checks to make sure they don’t carry blacklisted items such as aircraft parts or semiconductors. The congestion is not catastrophic, Mr Schellekens said, but to prevent further congestion, some port operators are refusing to accept ships carrying any cargo bound for Russia.
At the same time, he said, some European companies are not even trying to send goods to Russia for fear of violating the sanctions list of Western allies, which seems to be getting longer every day. Businesses are also beginning to shut down production due to fears that Russian customers will not pay them for shipped products, in part because financial sanctions have put a brake on payment mechanisms.
Russian-Ukrainian War and the World Economy
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Lack of basic metals. The price of palladium, used in car exhaust systems and mobile phones, is skyrocketing amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. Nickel prices, another key Russian export, are also on the rise.
financial turmoil. Global banks are bracing for the fallout from sanctions designed to restrict Russia’s access to foreign capital and limit its ability to process payments in dollars, euros and other currencies critical to trade. Banks are also ready for retaliatory cyberattacks from Russia.
“This means that the effect of the sanctions is wider than the sanctions themselves,” Mr. Schellekens said.
Mark O’Neill, president of Columbia Shipmanagement, a maritime services provider in Cyprus, said the impact on the smooth flow of goods was significant.
“Once you impose sanctions and embargoes, and companies themselves block certain trade, then the side effects of additional checks inevitably cause delays,” he said. “The marine logistics element is a very well-oiled machine, and it is enough to throw a small petal into the water to make the ripples feel very far away.”
Bottlenecks are not only in the water. Sanctions against Russia are putting new pressure on already limited air cargo capacity, resulting in skyrocketing freight rates. With Russian airspace closed to most carriers and the United States, the European Union and Canada banning Russian aircraft from flying into their airspace, analysts say the global air cargo market is rapidly shrinking.
Flights between Europe and Asia in particular are due to be changed, extending times by three to four hours on some routes and requiring more fuel as the war pushes oil prices to record highs.
Russian carriers such as AirBridgeCargo and Aeroflot Cargo — two major players that account for about one-fifth of the world’s air cargo — have cut traffic volumes sharply. While only 3 percent of the world’s cargo is transported by aircraft, air travel accounts for more than a third of world trade by value.
Land transport will also be affected as the conflict disrupts key rail routes between the European Union and China, slowing trade. Some companies have suspended rail services between regions due to concerns about disruptions at the borders. The sanctions also mean that European companies cannot work with Russian railways.
Freight is not spared either. According to Mr. Treftzger, Kuehne+Nagel stopped deliveries to Russia from Europe and China in order not to violate the sanctions. But the European trucking industry is also facing a new shortage of drivers as tens of thousands of Ukrainian truckers return to Ukraine to join the fight against Russia, he said.
This makes many European companies more dependent than ever on other means of delivering goods to customers. But conditions in the industry are likely to worsen before they improve, executives and analysts say.
“Transportation links are essential to global supply chains, and they have already been affected by the global pandemic,” said Anna Nagourni, a professor at the University of Massachusetts Eisenberg School of Management.
“Now we have an additional man-made disaster,” she said.