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The Russia-Ukraine war is not only sending commodity prices soaring but also disrupting operations of the global shipping industry. This has already slowed international trade and can hurt the prospects of quicker global economic recovery from the pandemic.
About 140 ships with over 1,000 seafarers are stuck in the Black Sea, as the ports in the region have suspended operations. Five ships have already been hit by missiles resulting in casualties. The ships are not sailing out of fear that they will be hit by missiles or underwater mines. The crew have no option but to stay on board but their stocks of food and fuel are running out.
The International Maritime Organisation has called an emergency meeting of the stakeholders to address the issue of safety of these seafarers.
Over 10 per cent of the global seafarers are Russians and about 5 per cent are Ukrainians. Almost half of them are highly qualified and experienced engineers, supervisors, and managers. Many Ukrainians want to return home but cannot do so due to paucity of flights. Some of them who had gone home are unable to return to the ships.
The shortage of skilled personnel at the middle and senior levels can hamper the operations of the shipping lines. The economic sanctions imposed on Russian banks by the West, the restrictions on withdrawals in hard currency from bank accounts in these countries and inability to use the credit cards issued by Russian banks has added to the problems of getting payments from Russian entities, making payment of salaries and their withdrawals for current expenditures by the seafarers.
Major shipping lines have stopped accepting bookings for Russia, Belarus, and Ukraine, even for humanitarian purposes. Russian-owned ships are barred from entering the ports in some European countries. Ships that had already sailed before these restrictions came in are also finding it difficult to reach the destinations.
The Russia-bound consignments get intercepted at the intermediate ports in Europe for rigorous examination to identify and detain sanctioned goods like dual use materials and goods meant for sanctioned parties, causing longer detentions of vessels at the ports and consequent congestion. The turnaround of the ships and containers is affected. “The impact is global and not limited to Russia,” says Maersk, the world’s largest shipping company.
Many logistics service providers have suspended the intercontinental rail bookings between Asia and Europe until further notice. The flights to Russia, Ukraine, and Belarus have already been suspended by many countries/airlines and no flights from these countries can go to many other destinations, worsening the supply chain disruptions.
The ocean freight rates had already gone up by 15 per cent to 20 per cent in the past three months. These are likely to go up further as the crude oil prices have shot up by about 20 per cent since the Russian invasion of Ukraine on February 24. Some flights between North America/West Europe and Asia have to take longer routes as they cannot fly over the Russian airspace. Consequently, the costs of air transportation may also go up.
With hectic diplomatic efforts, the war may end soon but if the sanctions don’t end quickly, the shipping disruptions may continue. So, the government has formed a committee to help Indian exporters and importers access shipping facilities amid a supply crunch in global shipping.
email:tncrajagopalan@gmail.com
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