The Ukrainian war and sanctions imposed on Russia by many nations around the world are already starting to cause havoc on global trade, with what could turn out to be devastating consequences for energy and grain importers.
There are also a great many ripple effects being caused in economies across a world while it still climbs its way back to normalcy after the two-year-long global pandemic, with its endemic supply chain disruptions.
Now that severe sanctions on Russia have been imposed after its invasion of Ukraine, hundreds of tankers and cargo carriers have had to turn away from Black Sea ports and dozens of additional ships are either stranded at ports or awaiting further orders while out at sea.
Ukraine War heavily affecting global trade as sanctions start to bite
Maersk, the shipping giant out of Denmark, is one of three major bulk cargo carriers that pledged to stop shipping to and from Russia, with its officers saying they would only deliver foodstuffs and medical and humanitarian aid for the forseeable future to Russia.
Since Russia is one of the world’s largest exporters of grains as well as major source of crude oil, metals, wood and plastics, such basic raw materials are sitting idly while the country is hit by the Ukraine War sanctions.
Many industries, ranging from steelmakers to car manufacturers, who need these vital materials are going without — just as they would have started ramping back up after the ravages of the pandemic.
Despite the fact that just a few of Russia’s fleet of 2,000 cargo and tanker ships have been sanctioned, freezing the assets of the largest banks in the country leads to major problems in the import and export of nearly every kind of raw material and manufactured item.
Now, enormous firms such as Apple and Nike joined the behemoth shipping company Maersk and other major bulk carriers in the severing of all trade ties with Russia.
Ami Daniel, a co-founder of Windward, a maritime intelligence firm that advises governments on a range of issues, states in an interview with the Associated Press, “This is an earthquake like we’ve never seen before.
“Companies are going well beyond what’s legally required and taking actions based on their own values before their customers even demand it.”
However well-meaning and effective the Ukraine war sanctions and boycotts may be, they only add to the chaos that was still reigning as the pandemic winds down. Dawn Tiura, the CEO of Sourcing Industry Group, says in an interview with France24, “Before this invasion, we already had ships that were messed up, we have a cargo issue around the world. We have containers that are not in the right places. We’ve had so much disruption in the supply chain and this is only going to disrupt it further.”
Greek shipping company Interunity group: Russian, Ukrainian officers cannot go home
The Greek shipping company Interunity Group is already feeling the pinch as their fleet of 60 oil tankers and bulk carriers are operated on a daily basis by a great many Russian officers and sea captains.
The strains are already being felt at Interunity Group, a family-run Greek shipping company whose 60 oil tankers and bulk carriers are operated by dozens of Russian and Ukrainian sea captains and officers.
Now, the Russian officers do not know how they might be able to get home after the EU imposed a flight ban on Russia; likewise the Ukrainians wondered if their homes would be there for them at all when they were finally able to return home.
George Mangos, one of Interunity’s directors, stated to the Associated Press that a Ukrainian senior officer who now finds himself stranded on a tanker in the Gulf of Mexico became so distraught that he demanded that he be allowed to return home before his contract ended.
“He told me he wanted to get off at the next port so he could fight for his homeland,” Mangos stated, who went on to admire the officer’s patriotism. “Operating a highly sophisticated tanker with a dangerous cargo is stressful even under normal situations, so all you can do is ask people to focus on the job and leave the politics aside. It’s hard, but these are very stoic people, and I’ve been impressed by their dedication.”
Ukraine war, sanctions cause products and vessels to be stranded in oceans around the world
Naturally, the Black Sea has borne the brunt of the impact from the war and sanctions. Both Russian and Ukrainian ports serve as major export points for wheat and corn, among other goods. All trade activity there has of course come to a halt in what is the world’s second-largest grain exporting region.
The fact that it is perishable means that the entire region will suffer, along with less well-off countries which need the grain right away for their basic needs.
Rohini Ralby, a director at I.R. Consilium, an American maritime consulting firm, states “The question is not whether there will be serious economic effects and critical food shortages in already fragile countries, the question is what Russia will do with that and how the West will react.”
Such nations include Egypt, India and Turkey, which heavily depend on Russia for an enormous range of products, from grain to natural gas.
Turkey imports an incredible 78% of its wheat imports from Russia, which it depends on to export its own finished food products. Much of those supplies are used in Turkey’s food industry, a major exporter itself.
India, which was markedly one of the countries that refused to condemn Russia in the UN this week after its invasion of Ukraine, imports approximately 80% of its oil, with much of it from Russia. The steel and other metals from Russia are also used by Indian manufacturers in the fifth-largest automobile industry in the world.
Although Russian oil only comprises 10% of all the oil used in the US, the possible exclusion of Russia as an oil supplier will undoubtedly cause prices to rise yet again for the precious commodity.
However, although Russia is also the second-largest supplier of platinum to the US, a precious metal that is used in car exhaust systems, overall Russia is just the 20th-largest supplier of goods to the US, according to trade data.
As of now, the US has not imposed a blanket trade embargo on Russia or even laid down specific sanctions on Russia’s energy sector, but the markets have had a case of the jitters since the financial measures were first taken last week.
Prices for wheat have risen over 55% compared to what they were the week prior to the invasion. And as everyone already knows, oil prices, which were already on their way up because of the world’s economic recovery after the pandemic, spiked to more than $110 a barrel for the first time in nine years.
Naturally, the rates for chartering oil tankers all over the world have skyrocketed in the turmoil caused by the sanctions, showing a staggering 400% increase as traders race to find capacity. The Windward company states that there are now 87 million barrels of Russian oil which are worth $10 billion currently floating in the oceans,waiting for buyers.