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INTERNATIONAL > Ukraine Crisis

Russia’s logistics crippled by sanctions, ensnarling global economy

  • March 6, 2022
  • , Nikkei Asia , 7:02 a.m.
  • English Press



TOKYO — Logistics in Russia is practically grinding to a halt as the U.S. and Europe tighten sanctions, hampering imports of products and parts as well as exports of rare resources and grain.


As a result of sanctions imposed over Moscow’s invasion of Ukraine, the Russian economy is becoming isolated from the rest of the world, and a standstill in the flow of goods threatens to depress the global economy.


Customs authorities at European Union members are banning ships carrying Russia-bound goods from using their ports, essentially stopping the sea routes used to transport many of the containers being shipped to Russia.


Dutch customs officials said on Tuesday that they have blocked containers bound for Russia to comply with new sanctions, with those containers to be inspected to check if they contain restricted goods. Many containers are currently stuck in Rotterdam.


The terminal operator at the German port of Hamburg also announced that it will stop handling containers headed for and coming from Russia.


Russia’s major ports include St. Petersburg on the Baltic Sea, Novorossiysk on the Black Sea and Vladivostok in the Russian Far East. These three ports handled 74% of Russia’s total container volume of 5.63 million twenty-foot equivalent units in 2021, according to Russian port statistics.


Goods shipped from Asia to Russia are typically carried by ultralarge container ships first to European ports such as Rotterdam and Hamburg, where they are reloaded onto smaller vessels. The refusal by customs officials at European ports to reload the cargo has practically made shipping goods to Russia impossible.


A total of 113 ships entered and left the port of Novorossiysk on Friday, including domestic shipping, down from the average 143 in the second half of February, according to shipping information provider MarineTraffic.


After economic sanctions were imposed, MSC of Switzerland, the world’s largest shipper, and Denmark’s A.P. Moller-Maersk stopped taking orders to ship goods to and from Russia. Ocean Network Express — a joint venture between three Japanese shippers — halted all Russian shipping except at Vladivostok. That port has essentially become Russia’s sole open sea route, but it handles only about a fifth of Russia’s total container volume.


Satellite photos of the freight yard at Khabarovsk on Feb. 2, left, and March 1. Hundreds of freight cars carrying containers can be seen in the February photo, before the Ukraine invasion, but there appears to be fewer freight cars in the more recent photo. (Photos courtesy of Planet Labs PBC)

Vladivostok is the terminus of the Trans-Siberian Railway. Goods were expected to take this route as an alternative if they cannot come via the Baltic or Black seas, but that has not happened. Although trains are running, there are fewer freight cars compared with early February at the freight yard at Khabarovsk — one of the main stations on that line — based on an analysis of satellite photos of taken by U.S. company Planet Labs on Tuesday. This could mean that the movement of goods toward inland areas has slowed because deals for products are not being struck due to the plunge in the value of the ruble.


Major Japanese insurers have designated ports on Russia’s Black Sea coast as dangerous, so consignors need to get additional war-risk insurance coverage. Insurance premiums “could reach five times normal rates depending on the state of fighting,” said an official at a nonlife insurer. This has prompted some shippers to halt shipments because those routes have become unprofitable.


Shipping by air has also been affected. The EU has barred Russian aircraft from flying over EU airspace, and Russia countered with similar measures.


The livelihoods of the Russian people are starting to be affected by the slowdown in shipments. Prices of digital products, for which Russia relies on imports, have spiked. Panasonic said Friday that it will stop shipping appliances and business-use cameras to Russia. The shortage of goods in Russia is expected to become more serious.


The International Monetary Fund had forecast in January that Russia’s gross domestic product will grow 2.8% this year. In a report released on Tuesday, Goldman Sachs revised Russia’s GDP projection to a 7% contraction from 2% growth.


Should shipping by sea and air continue to be crimped, Russia will have no choice but to rely on such routes as shipping via the Trans-Siberian Railway and by land from China, according to an official at a logistics company. It is unclear if Russia can offset the impact of sanctions with China’s support.


A slowdown in exports of rare resources and grain from Russia could lead to higher prices for raw materials, placing a burden on companies and consumers around the world. The impact on the global economy will grow unless a cessation of hostilities is not realized soon.

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