By JOSHUA GOODMAN, Associated Press
MIAMI (AP) — Sanctions on Russia are beginning to wreak havoc on global trade, with potentially devastating consequences for energy and grain importers while generating ripple effects in a world still grappling with pandemic-induced supply chain disruptions.
Since Russia’s invasion of Ukraine, hundreds of tankers and bulk carriers have been diverted from the Black Sea, while dozens more have been stranded in ports and at sea, unable to unload their precious cargoes. Russia is a leading exporter of grain and a major supplier of crude oil, metals, wood and plastics, all of which are used around the world in a range of products and by a multitude of industries, from steelmakers to Car manufacturers.
Only a small handful of Russia’s 2,000 freighters and tankers have been sanctioned by Western powers, but freezing the assets of the country’s biggest banks means import and export business from Russia will be hit hard. Companies from Apple and Nike to major shippers like Maersk are abandoning the country, whose extensive trade ties with the West have been all but severed, intensifying the pressure.
“It’s an earthquake like we’ve never seen before,” said Ami Daniel, co-founder of Windward, a maritime intelligence firm that advises governments. He added, “Companies are going far beyond what is legally required and taking action based on their own values even before their customers demand it.”
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A potential escape valve for Russian exports is China, whose rapidly growing economy is starved of natural resources. But China, perhaps the biggest beneficiary of globalization, has so far shown little appetite to fully back President Vladimir Putin despite abstaining in a UN vote condemning the land grab. .
Tensions are already being felt at Interunity Group, a family-owned Greek shipping company whose 60 tankers and bulk carriers are operated by dozens of Russian and Ukrainian captains and officers.
After the invasion, the Russian part of the Interunity workforce wondered how they were going to get home after the European Union imposed a flight ban on their country. The Ukrainian half did not know if she would have a home to return to.
A senior Ukrainian officer stranded on an oil tanker in the Gulf of Mexico was so distraught he demanded to be allowed to disembark months before his contract was up, said George Mangos, one of Interunity’s directors.
“He told me he wanted to get off at the next port so he could fight for his homeland,” said Mangos, who expressed admiration for his patriotism. “Operating a highly sophisticated tanker with dangerous cargo is stressful even in normal situations, so all you can do is ask people to focus on work and leave politics behind. is difficult, but they are very stoic people, and I was impressed by their dedication.
So far, the war’s impact on world trade has been most severe in the Black Sea, where Russian and Ukrainian ports are major hubs for wheat and corn. Traffic came to a halt, shutting down the world’s second-largest grain-exporting region.
Unlike oil production, which can increase rapidly elsewhere, increasing grain supplies takes time and the very volume that could be diverted due to war and sanctions – Ukraine accounts for 16% of exports corn and, with Russia, 30% of wheat exports – means that the poorest countries that depend on imports could face major supply shocks.
“The question is not whether there will be severe economic effects and critical food shortages in already fragile countries, the question is what Russia will do with it and how the West will react,” he said. Rohini Ralby, director of IR Consilium, an American organization. maritime consulting firm.
Among the countries most at risk are Egypt, India and Turkey, all of which rely heavily on Russia for everything from staple foods used to make flatbread to natural gas and tourism.
About 78% of Turkey’s wheat imports come from Russia and 9% from Ukraine. Much of this supply is used by the Turkish food industry, itself a major exporter. India imports about 80% of its oil, largely from Russia, and metals from Russia to supply the world’s fifth largest automotive industry.
In the United States, the biggest impact will be felt at the gas pump, where higher prices are expected to add to inflation already underway at the fastest pace in four decades. Russia was the third-largest source of petroleum products sold in the United States last year – behind only Mexico and Canada – and responsible for 8% of all imports. Russia is also the United States’ second-largest supplier of platinum, a metal used to make automobile exhaust pipes.
But overall, Russia was only the 20th largest supplier of goods to the United States, according to US trade data.
While the Biden administration has refrained from a general Russian trade embargo or targeting the Russian energy sector, to limit the pain of the West, it has done little to calm the markets.
Wheat prices have jumped more than 55% since the week before the invasion. Oil prices, which had been rising steadily since the start of the year on demand from a recovering global economy, rose above $110 a barrel for the first time since 2013.
And rates charged to giant charter tankers around the world have jumped 400% as oil traders scramble to secure capacity that is suddenly becoming scarce. Windward estimates that there are 87 million barrels of Russian oil worth $10 billion floating in the ocean, struggling to find buyers.
It is not yet clear how the economic war against Russia will play out and what other unintended consequences might be in store. While over-compliance with sanctions is a common problem, never before have restrictions been imposed so quickly and coordinated so closely among US allies to target a global power.
The situation worries Tinglong Dai, a business professor who studies supply chains at Johns Hopkins University. Since the end of the Cold War, the foundation of global trade has been a separation of geopolitics and business and an assumption that rational decision-making will always prevail, Dai said.
“Both were destroyed by Russia,” Dai says, adding that a new sort of “Iron Curtain” may soon emerge, with Russia and its allies on one side and the West on the other.
“It is no longer possible to avoid choosing sides, and the consequences of this reconfiguration of global supply chains in terms of increased poverty, loss of innovation and job opportunities are something something we will all have to pay for,” he said.
Associated Press writers Suzan Fraser in Ankara, Turkey, and Ashok Sharma in New Delhi contributed to this report.
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