Russian ships banned from mooring in Britain. Freight containers are piled up in European ports. Air travel was diverted Ukraine and Russia.
Just as the world economy was on its way out of the coronavirus pandemic, Russia’s invasion of Ukraine and global sanctions against Moscow they flow through logistics and supply chains, creating bottlenecks in the transportation of goods and commodities and threatening new economic pain for countries and businesses near the conflict zone.
Transport companies, marine insurance executives and industry analysts say the two-week-old war, combined with uncertainty caused by sanctions, is backing up ships at some ports and could lead to longer delays in deliveries, especially across Europe.
The cost of transporting cargo delivered by sea, land and air, which had already jumped during the pandemic, is also under pressure as world oil prices this week exceeded $ 130 a barrel.
“We thought we experienced a return from Covid in January and February,” said Detlef Trefzger, CEO of Swiss company Kuehne + Nagel, one of the world’s largest transport companies, delivering cargo by ship, air, rail and truck. “But the Ukrainian-Russian crisis is a great failure,” he said, “and it will be a long-term failure.”
The most serious blow is felt in the heart of the war zone, in the Black Sea.
More than 100 ships and their crews have run aground in Ukrainian ports since Russia’s invasion of Ukraine. The missiles hit several commercial vessels, and an explosion on or near an Estonian dry cargo ship flooded it 20 miles from Odessa, a Ukrainian port. All crew members from Russia and Ukraine survived.
The risk has forced shipowners to pay an additional insurance premium of 1 to 5 percent of the vessel’s value, said Marcus Baker, head of global shipping and freight at Marsh McLennan, an insurance broker and risk consultant. The Joint Military Insurance Industry Committee this week expanded its high-risk zones to waters near Romania and Georgia after Russian and Ukrainian waters joined last month.
Secretary-General of the International Maritime Organization Kitak Lim said at an emergency session of the council on Thursday that there were serious concerns about the safety and well-being of sailors in the Black and Azov Seas and that sailors could not be a collateral damage in the military crisis.
The blockade has cut global grain supplies from one of the world’s largest grain-producing regions, pushing wheat prices in world markets and inflates the threat of inflation. Russia and Ukraine together account for almost a quarter of world wheat exports.
Problems around the Black Sea are the tip of the iceberg, causing disruptions in the entire logistics industry and putting pressure on world trade, analysts say.
Over the past two weeks, some European terminal operators have abandoned ships carrying goods to Russia, and hundreds of cargo containers heading to Russia have piled on others.
Britain has gone further, announcing sanctions banning Russian courts from entering its ports to “limit Russia’s economic interests.” About 20 ships have been withdrawn from British ports, said Richard Ballantyne, executive director of the British Ports Association.
World ports have already faced bottlenecks during the Covid-19 pandemic – especially in the United States, where dozens of ships are stuck from California due to the lag of warehouses and shortage of truckers to ventilate cargo across the country.
Although the congestion in European ports is not so severe, sanctions aimed at punishing Moscow without destroying the European economy are changing this calculation.
In the port of Rotterdam in the Netherlands, the largest seaport in Europe, some terminals have become “parking” for hundreds of cargo containers bound for Russia, said port spokesman Ty Schelleckens.
Many of the containers stacked on the docks undergo customs inspections, which take a long time to make sure they do not have blacklisted items, such as spare parts for aircraft or semiconductors. The congestion is not catastrophic, Mr Shelekens said, but to prevent further congestion, some port operators are refusing to accept ships carrying any cargo heading to Russia.
At the same time, he said, some European companies are not even trying to send goods to Russia for fear of violating the list of sanctions by Western allies, which seems to be increasing day by day. Businesses are also beginning to curb production amid fears that Russian customers will not pay them for shipped products, in part because financial sanctions are smoothing out payment mechanisms.
Russian-Ukrainian war and the world economy
“This means that the effect of sanctions is broader than the sanctions themselves,” Mr Shelekens said.
Mark O’Neill, President Columbia Shipmanagement, a maritime service provider in Cyprus, said the impact on the uninterrupted flow of goods was significant.
“Once you impose sanctions and embargoes and the companies themselves block certain trade, the consequences of additional inspections inevitably cause delays,” he said. “The maritime logistics element is a very well-oiled machine, and just a light petal is enough to throw into a pond to make ripples feel very far away.”
Bottlenecks are not just on the water. Sanctions against Russia are putting new pressure on already restricted freight transport, causing jumps in transport tariffs. Due to the fact that Russian airspace is closed to most carriers, and the United States, the European Union and Canada ban Russian aircraft from entering its airspace, the global air transportation market is rapidly shrinking, analysts say.
Flights between Europe and Asia, in particular, need to be diverted, adding three to four hours to some routes and demanding 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 a fifth of the world’s air traffic – have retreated sharply. While only 3 percent of global cargo is transported by aircraft, air transport accounts for more than a third of world trade in value.
Land transport has also been affected, as the conflict disrupts major rail routes between the European Union and China, slowing trade. Some companies have suspended rail freight between regions due to concerns about border disruptions. Sanctions also mean that European companies cannot work with Russian railways.
Do not spare and trucking. Kuehne + Nagel has suspended supplies to Russia from Europe and China to avoid violating sanctions, Mr Trefzger said. But Europe’s 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 noted.
This leaves many European companies more than ever dependent on other ways of delivering their goods to customers. But conditions in the industry are likely to deteriorate before they improve, executives and analysts say.
“Transportation links are important to global supply chains and have already been affected by the global pandemic,” said Anna Nagurny, a professor at the Isenberg School of Management at the University of Massachusetts.
“Now we have an additional man-made disaster,” she said.