MIAMI – Sanctions against Russia are beginning to destroy world trade, with potentially devastating consequences for importers of energy and grain. generating ripple effects worldwide still struggling with supply chain disruptions caused by the pandemic.
Since Russia’s invasion of Ukraine, hundreds of tankers and bulk carriers were diverted from the Black Sea, while dozens of others ran aground in ports and at sea, unable to unload their valuable cargo. Russia is a leading exporter of grain and a a major supplier of crude oilmetals, wood and plastics – all used worldwide in a variety of products and industries, from steel to carmakers.
Only a small handful of the 2,000 Russian cargo and tanker ships were there sanctioned by Western powers, but the freezing of the assets of the country’s largest banks means that the business of importing and exporting from Russia will receive a serious blow. Enhance compression are companies from Apple and Nike to major shippers such as Maersk, leaving the countrywhose extensive trade ties with the West were almost severed.
“This is an earthquake we’ve never seen before,” said Amy Daniel, co-founder of Windward, a marine intelligence firm that advises governments. He added: “Companies go far beyond what is required by law and take action based on their own values before their customers even demand it.”
One of the potential valves for Russian exports is China, whose fast-growing economy is hungry for natural resources. But China, arguably the biggest beneficiary of globalization, has so far shown little appetite to fully support President Vladimir Putin, despite abstaining from a UN vote condemning the seizure.
Tensions are already being felt in Interunity Management Corp SA, a family-owned Greek shipping company whose 60 oil tankers and bulk carriers are operated by 200 Russian and Ukrainian naval captains and officers.
After the invasion, half of Russia’s Interunity workforce wondered how they would get home after the European Union imposed a ban on flights to their country. The Ukrainian half did not know whether they would have a house to return to.
One of Ukraine’s senior officers, who found himself on a tanker in the Gulf of Mexico, was so confused that he demanded permission to disembark a few months before the end of his contract, said George Mangas, one of the directors of Interunity.
“He told me he wanted to go out in the next port so he could fight for his homeland,” Mangos said. “Operating a very complex tanker with a dangerous cargo is stressful even in ordinary situations, so all you can do is ask people to focus on work and leave politics aside. It’s hard, but they are very stoic people, and I was impressed by their devotion. “
So far, the impact of the war on world trade has been most severe in the Black Sea, where Russian and Ukrainian ports are major centers for wheat and corn. The movement has stopped, effectively stopping the world’s second-largest grain export region.
Unlike oil production, which can be rapidly increased elsewhere, increasing grain supplies takes time and volumes that can be diverted by war and sanctions – Ukraine accounts for 16% of world corn exports and, along with Russia, 30% of wheat. exports – means that poor countries that depend on imports may face severe supply shocks.
“The question is not whether serious economic consequences and the critical food shortages in already fragile countries, the question is what Russia will do about it and how the West will react, ”said Rohini Ralby, director of the IR Consilium, an American maritime consulting firm.
Among the countries most at risk are Egypt, India and Turkey, all of which depend heavily on Russia for everything from basic pancake products to natural gas and tourism.
About 78% of Turkey’s wheat imports come from Russia and another 9% from Ukraine. Most of these supplies are used in Turkey’s food industry, which itself is a major exporter. India imports about 80% of its oil, most of it from Russia, and metals from Russia to supply the world’s fifth-largest automotive industry.
In the US, the biggest impact will be felt by the gas pump, where higher prices are expected to lead to inflation, which is already going at the fastest pace in four decades. Russia was the third largest source of oil in the United States last year – second only to Mexico and Canada – and accounted for 8% of total imports. Russia is also the second largest supplier of platinum in the United States, a metal used to make exhaust fumes for cars.
But overall, Russia was only the 20th largest supplier of goods to the United States in 2019, according to U.S. trade data.
While the Biden administration refrained from a general Russian trade embargo or targeting Russia’s energy sectorto limit the pain in the West, lo little has been done to calm the markets.
Wheat prices jumped more than 55% from the week before the invasion. Oil prices, which have been rising steadily since the beginning of the year due to demand from the recovering global economy, for the first time since 2013 exceeded $ 110 per barrel.
And rates levied on charter giant oil tankers around the world have jumped as much as 400% as oil traders struggle for capacity that suddenly becomes scarce.
It is unclear how the economic war against Russia will shake up and what other unforeseen consequences may be. Although excessive enforcement of sanctions is a common problem, never in the past have restrictions been imposed so quickly and so closely coordinated between U.S. allies to aim for world power.
The situation is alarming to Tinglong Day, a business professor who studies supply chains at Johns Hopkins University. Since the end of the Cold War, the basis of world trade has been the separation of geopolitics and business and the assumption that rational decision-making will always prevail, Dai said.
“Both were destroyed by Russia,” Dai said, adding that a new kind of “iron curtain” with Russia and its allies on the one hand and the West on the other could soon emerge.
“It is no longer possible to avoid choosing a party, and the consequences of this reconfiguration of global supply chains in terms of greater poverty, loss of innovation and jobs are something we will all have to pay for,” he said.
Associated Press writers Susan Fraser of Ankara, Turkey, and Ashok Sharma of New Delhi contributed to this report.
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