Russian maritime trade halves as sanctions bite

According to latest data Russian maritme trade halves as international sanctions begin to bite following the country’s invasion of Ukraine. The extent of the damage to the Russian economy is as yet unclear suffice to say that the fall in seaborne trade is three and half times as much as the worst point during the Covid-19 pandemic.

According to some sources the country will have around three weeks supply of most goods, which means that supplies of many goods should start to dry up now. That means stores start to run out of items bringing the war home to the Russian people.

Data suggests that prior to the invasion around 325 were bound for Russia at any time, however that number according to financial data provider Refinitiv has fallen around 55% taking it down to 150.

Glenn Koepke, a General Manager at Four Kites, a supply chain technology platform, told Sky: “In my 20-year career, I have not seen this big of a drop into one destination, as we’ve seen over the last three weeks.”

It’s not only sanctions, but physical harm to ships and their crew that are having an impact, particularly in the Black Sea with Russian naval forces launching hundreds of missiles into Ukraine prompting many shipping companies either to cancel or reroute away from the area.

Western sanctions are affecting not only traffic in the Black Sea but elsewhere in Russia with ports in the Baltic Sea, like St Petersburg, reporting a drop of 65% in shipping traffic. In the Pacific, the number of ships has declined by 52% since the war started. These ports, including Vladivostok, primarily receive cargo from China, Japan and South Korea.

With imported goods becoming scarce factories are also beginning to feel the pinch, car maker Lada this week announcing the suspension of operations at three factories, with more than 30,000 people unable to work.

Western companies have spurned Russia across the board, even in industries not affected by sanctions, including dry commodities such as coal, grain and fertilisers, of which Russia is a major exporter.

The number of container ships, oil tankers and dry bulkers, which account for three quarters of the Russia-bound fleet, has dropped between 40% and 60% since late February, according to UBS data.

Suggestions are that Western companies are concerned with the social impact and reputational risk of doing business with Russia.

Russia is however not the only one feeling the pinch with the country producing a quarter of global pipeline gas and a tenth of global oil, with the percentage of the trade with the EU much higher.

According to the Russian Finance Ministry it had an income of $500m (450 million euros) per day from oil and gas sales, a figure that is likely to be higher as oil and gas prices have risen sharply.

By comparison, the industries affected by sanctions make up a small proportion of Russia’s economy. The country accounts for just 1.5% of global trade in physical goods and less than 0.5% of global cross-border banking transactions.

Not everyone has ceased trade with Russia, countries such as China, having continued at pre-invasions levels in most sectors. There is evidence however of a change in attitude amongst Chinese owned businesses with some seeking to distance themselves from the country.

Whether the drop in Russian maritime trade will be sufficient to turn public opinion against Putin and his henchmen remains to be seen, however the longer the war goes on the more the people of Russia will suffer as will the economy.

Thank you for taking the time to read this article, do remember to come back and check The Euro Weekly News website for all your up-to-date local and international news stories and remember, you can also follow us on Facebook and Instagram.